I know that if we calculate a BES and it’s for 6 months we divide the spread by 2. If it wanted the yield change to offset the spread over 90 days, would we divide the spread by 4, or would we divided by 2 and then take the square root? Just wanted to double check.
I have not seen any compounding considerations in these problems, they usually just ask about a general yield.
Everything I have seen you just simply divide the yield by the periods desired.
Correct - if they ask for quarterly breakeven spread, divide by 4
And remember to use the higher duration of the two bonds in the BE equation when you solve