# SS10: R25: P156: Q26: usage of conversion ratio

SS10: R25: P156: Q26: usage of conversion ratio:

in which case we will divide the results by conversion ratio, which case multiply it? Thanks.

yeh, i wish they are more clear on what they mean by conversion ratio, which is in den and which is in num

from what i got, they use the conversion ratio to mean how many you have to submit of the bond you selected, so if it is 1.1, you must submit 1.1 for each contract

now as far as when to multiply and when to divide, dont memorise rules, understand the conversion ratio and think accordingly

Conversion factor = (dollar duration of CTD)/(dollar duration of futures)

So, to get the number of futures contracts, use multiplication. To keep it simple, I would use division(DD of CTD/cf) in the denominator.

This is the Schweser Formula

# Contracts = (DD Target - DD Current) / DD Future

DD Future = DD CTD/ Conversion Factor

another way of putting it - so it is all consistent:

# Contracts = (DDTarget - DD Current) / DDCTD * Conversion Factor

which is how the CFA book has it…