Employing Financial Futures to Increase the Return on Near Cash (Treasury Bill) Investments

The purpose of this article is to formulate and test a decision model to increase the return on a pool of liquid assets through the use of Treasury bill futures contracts. Recent literature has documented inefficiencies in the pricing of T-bill futures. These inefficiencies can be exploited to incre...

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Bibliographic Details
Published in:Management science 1985-03, Vol.31 (3), p.293-300
Main Authors: Elton, Edwin J, Gruber, Martin J, Rentzler, Joel C
Format: Article
Language:English
Subjects:
Algorithms
Applied sciences
Cash
Corporate treasurers
Decision making
Dynamic programming
Exact sciences and technology
finance
Financial
Financial futures
Financial instruments
Futures
Futures contracts
Futures market
investments
Investors
Operational research and scientific management
Operational research. Management science
Portfolio management
Portfolio theory
Prices
Profitability
Profits
Rates of return
Stays of execution
Theory
Trade
Transaction costs
Treasury bills
United States Treasury bills
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Summary:The purpose of this article is to formulate and test a decision model to increase the return on a pool of liquid assets through the use of Treasury bill futures contracts. Recent literature has documented inefficiencies in the pricing of T-bill futures. These inefficiencies can be exploited to increase the return on a portfolio of T-bills without affecting the maturity of the portfolio. The solution technique used is dynamic programming. The results of applying a dynamic programming algorithm parameterized on available data to trade in real time are presented. The rules lead to increased returns.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.31.3.293