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

Edwin J. Elton, Martin J. Gruber and Joel C. Rentzler
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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

Management Science, 1985, vol. 31, issue 3, 293-300

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 (search for similar items in EconPapers)
Date: 1985
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:31:y:1985:i:3:p:293-300

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