Hey, would anyone be kind enough to explain how the following formulas from pg 81 of Schweser Book 3 work? DD(f) = - (effective duration)(0.01)(face value)(futures price/100) I dont quite understand the last term? And: DD(f) = DD(CTD)/CTD(Conversion Factor) No idea how that is derived/works? Help most appreciated!
Don’t worry how it is derived as it is out of scope. Just remember the formula and how to use it given information in the exam. We guys think too much.
I find the amount of time people on this board spend working on issues/problems outside the requirements of the curriculum (and more specifically, test day) to be absolutely staggering. There’s twenty seconds I’ll never get back.
I find it easier to write exams if I understand everything rather than memorise it. I dont try and figure out the derivation and application of Black-Scholes, Black-Litterman etc as they are too complex. These formulas look straight forward though. Anybody know how they work?