In our treasury bond futures trading, the conversion coefficient of treasury bond futures is usually calculated and published by China Financial Futures Exchange, and its calculation method is also open. The calculation formula of treasury bond futures conversion coefficient is a bit complicated, and the calculation of conversion coefficient of different futures exchanges is slightly different.

For example, in the European Futures Exchange, the conversion coefficient of treasury bonds futures is accurately calculated, while in the Chicago Board of Trade, the approximate method is adopted. However, no matter what calculation method is adopted, the principle is the same.

That is to say, when calculating the conversion coefficient of deliverable bonds, we must first determine the remaining term of bonds on the maturity date of treasury bonds, and then use the nominal bond interest rate of futures contracts as the discount rate to convert all the cash flows of bonds with a face value of 1 yuan into the present value, which is the conversion coefficient of bonds.

Therefore, intuitively speaking, the conversion factor is actually a bond price, but this bond price is calculated on the assumption that the market yield is the futures coupon rate and the yield curve is horizontal.