Employing Financial Futures to Increase the Return on Near Cash (Treasury Bill) Investments
Edwin J. Elton, Martin J. Gruber, Joel C. Rentzler
Management Science · 1985 · Volume 31 · Issue 3
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.
Keywords
futures, finance, investments, dynamic programming
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