Apply yield beta if conversion factor given?

CFA Level III
#1

Hi everyone,

When calculatng the number of required bond futures contracts, do you have to apply both the conversion factor and the yield beta if both are given?

I was doing an old mock, and both were given, but only the converison factor was applied, and not the yield beta (although if you applied yield beta, that was one of the solutions available)

Can someone please confirm? Thanks much.

#2

Yield beta must be used if given. I remember one mock where it was in errata. The actual yield beta was 1 instead of 1.12 which makes the answer correct. Search the forum and you will find the reference to errata for your mock.

#3

ext if you find it can you post it. i also had that question and was confused by that.

#4

[(Duration of the bond to be hedged*Price of the bond to be hedged)]/[(duration of the CTD*Price of the CTD)]*ConversionfactorfortheCTDbond×Yieldbeta

from the textbook.

#5

Yield beta and CTD factor have nothing to do with each other.

#6

As i remember, yield beta is used when you adjust your calculation using another bond as proxy, maybe he was calculating directly the # of futures ( i mean the bond was not the proxy but the right one), maybe thats why you didnt have to use the yield beta (i think), but i dont know, which exam was it??

#7

guys there was an erratum. jpsi1 confirmed. this topic can die.

#8

+1

#9

If both are given, both have to be used as multiplication right?

#10

thats my interpretation.