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

Author

Listed:
  • Edwin J. Elton

    (School of Business, New York University, New York, New York 10006)

  • Martin J. Gruber

    (School of Business, New York University, New York, New York 10006)

  • Joel C. Rentzler

    (Center for the Study of Business and Government, Baruch College, City University of New York, New York, New York 10010)

Abstract

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.

Suggested Citation

  • Edwin J. Elton & Martin J. Gruber & Joel C. Rentzler, 1985. "Employing Financial Futures to Increase the Return on Near Cash (Treasury Bill) Investments," Management Science, INFORMS, vol. 31(3), pages 293-300, March.
    • Handle: RePEc:inm:ormnsc:v:31:y:1985:i:3:p:293-300
    DOI: 10.1287/mnsc.31.3.293
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    Cited by:

    1. Lin, James Wuh, 1996. "Arbitrage, carrying costs, and inflation: A reexamination of market efficiency in treasury bill futures," International Review of Economics & Finance, Elsevier, vol. 5(2), pages 207-222.

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