I’m confused as to when to factor in Yield Beta in addition to MD when calculating # of contracts to use on a hedge. Seems like it’s a distracter and not used in some questions but not so in others? What am I missing here? Having a problem with question 50 in the schweser practice exam volume 2 test 1 (afternoon).
Yield beta when given should be included
#F = (Yb)*[(BPVt-BPVp/BPVf)]*[Duration Gap/(PriceF*Multiplier)].
When yield beta isn’t given it is assumed to be 1.
Now I’m even more confused because I could have sworn i’d been ignoring it and still getting questions right. What exactly is yield beta conceptually? You would think MD of a contract and yield beta would essentially be the same thing no?
right i’m talking about when it’s included and not 1 obviously