question from sample exam, quick note from the answer 1. yield beta- relationship between portfolio and CTD bond 2. conversion factor- relationship between CTD bond & futures contract Did I make a transprict error? I think the answers should be inverted. Please advice. Thanks
No, that is correct.
would you please clarify the question? Isn’t yield beta the sensitivity of the yield on a bond portfolio related to the implied yield on the futures contract? Why is it related to the CTD bond and portfolio? please help !! Many thanks
Its the sensitivity of the CTD Bond to changes in the Portfolio or vice versa.
To adjust the DD of a portfolio using futures is this formula correct? # Ks = [(DDt-DDp)/DDf]*Yield Beta???
Yes and if there was a conversion factor you would multiply that too.