Scholars,
This is a really dumb question that I have been wanting to ask for weeks :
When do you use Bond Futures (the one with a CTD and Conversion Factor) and when do you use Bond Index Futures (the ones similar to Equity Index Futures but with Duration instead of Beta) ?
Obviously, we are always being told which one to use in the way the question is phrased, but it’s a pretty basic concern and I don’t have the answer to that.
As far as I can tell, for hedging you can use both. For Asset Allocation, however, you must use the Bond Index Futures by reducing Duration.
Thoughts ?