Why do we sometimes use duaration of cash as .25 and sometimes 0 . schwezer uses both in one question, so very confusing thanks
This seems to cause lots of confusion. The way I understand it, D=.25 is the approximate duration of T-Bills…thus if you are going from a bond to cash and staying in cash you should use .25 as the target duration for the amount you’re converting (they may give you an exact duration of T-Bills, so use it instead of .25 if it is stated). You would use D=0 as the target if you were say converting bonds to equity, because you are really just going to cash for an instant and then to stock. The idea is if your are going to stay in cash you want a return of T-Bills.
…and to mess with your head sometimes they even use D=0.125 
That’s a quarterly Swap, thus T-bill/2…I think is how it is derived.
Correct Spongie. For semiannual it’s D=0.5/2 = 0.25 and for quarterly it’s D = 0.25/2 = 0.125
thanks, it makes it clear