# yield beta VS conversion factor

I know the definition of these two things, but now really confused when to use them. Is that possible to use both of them together?

yes, if you have a CTD situation and trying to determine the # of futures with a FI question.

it is possible if you have futures on foreign treasuries which you want to add to your portfolio

I think yield beta is used when we use equities futures and conversion factors when we use Bond futures… So they cant be used togethor accd to me …

Hello the Edge. I found this formula: number of contracts = ( DD_t - DD_p ) / (DD_f ) where DD_f = DD_CTD / CTD conversion factor. This one does not use yield beta. Just because the question does not mention it?

Oh, Edge, you are right. Thanks. I find this formula: To adjust the above formula (the one I posted 2:01 AM) above for fully hedging interest rate risk when yield spread is not constant, we must adjust the formula to incorporate the yield beta as follows: hedge ratio = DD_p / DD_CTD × conversion factor for the CTD × yield beta

Yield Beta is used I believe, but most of the tiem it is assumed to be 1

lawbringer Wrote: ------------------------------------------------------- > Oh, Edge, you are right. Thanks. > > I find this formula: > > To adjust the above formula (the one I posted 2:01 > AM) above for fully hedging interest rate risk > when yield spread is not constant, we must adjust > the formula to incorporate the yield beta as > follows: > > hedge ratio = DD_p / DD_CTD × conversion factor > for the CTD × yield beta I wonder if anyone actually does that. That yield beta thing is full of error, the CTD bond changes and which bond is CTD depends on repo rates and then lots f points on he yield curve…

Hi, I am confused in this

What to in case of bonds if both are given?