formula for number of contracts needed to hedge and yield beta

Hi, I was going over Reading 28, (from schweser) and got stuck at the very beginning. after stating the formula for the number of contracts needed to hedge or leverage a position, it stays that this formula should be essentially the same formula for fixed income hedging (but using beta instead of duration as the risk measure).

the formula is like this: Number of contracts = {[(desired portfolio beta) - (portfolio beta)]/(equity futures beta)} * {(current Value of portfolio)/(futures price * multiplier )}

I cant remember about using it; so I go back to readings 22 and 23, but I can`t find any formula like this one. I looked at the end of the book formula sheet, and find one a little bit similar, but still without the second part of the one in R28.

  • Can anyone help understand where is it used in fixed income?
  • I cant even remember about “yield beta”… what is it? where we studied it?


It is used under duration hedging. About yield beta:

Both formulas are essentially the same. The best course of action is to learn both.