In Schweser notes the return impact is
Return impact ≈ −(Duration × ΔSpread) + (Convexity × (ΔSpread)^2)
however in Qbanks it is computed as Return impact ≈ −(Duration × ΔSpread) + (1/2 *Convexity × (ΔSpread)^2)
Can someone shed light please
As far as I remember in Level 1 (2011) we used the first one.
Thank you
http://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/91319979
http://www.analystforum.com/forums/cfa-forums/cfa-level-i-forum/91320692
Thank you Sir. So let me be a pest 
If in the exam we are required to calculate the return what formula you suggest to use?
Thank you.
You’re welcome.
Just this once.
By “calculate the return” I assume you meant “calculate the price change”.
If it’s in credit analysis, divide by 2; otherwise, don’t.
My pleasure.
Logged in the forum to post the exact same question ^^
I’m a physic.
Thank you Sir
As both the CFAI-book and the market (=the real world) are applying both covexity measures, I guess they will tell you which convexity measure they are providing and then it is up to you to use it correctly. I. e. you have to figure out whether or not to divide by 2 (multiply by ½) when you use the given convexity measure in calculating the price effect of a change in interest rates.
rgs Henning Hansen
Quote:
By “calculate the return” I assume you meant “calculate the price change”.
If it’s in credit analysis, divide by 2; otherwise, don’t.
H when do you use the second measure that is of multiplyng by 1/2? thank you
No fixed rules for when to use what. And the one is not better than the other. But it seems like the auther (Gotkind) of the credit section are more familiar with using the one that has to be multiplied by ½ (CFAI p.275) , while Fabozzi who wrote the rest of the FI-stuff seems to divide the convexity measure by 2 (CFAI page 352) and therefore there is no need to divide by 2 again when you are applying the convexity in calculating the price effekt of a yield change.
But given this confusion, which is more caused by the market than by CFAI, they really have go give you a hint what kind of convexity measure they are providing when asking the exam questions
rgs
Henning Hansen