Schweser notes use (.5 x C x YTM^2) for the convexity adjustment. I noticed that on a sample test and on investopedia the convexity adjustment is listed as (C x YTM^2). Which way is correct, 1/2xC or just C? Or do they apply to different scenarios?
I think for the exam is with the 0.5 factor.
thanks for the reply harro - anyone know if there any explanation of why there is a difference?
CFA Institute changed their view on whether the ½ belongs in the formula to calculate convexity or in the formula to use convexity.
At the moment, it’s in the formula to use convexity. I address it in more detail in the article I wrote on convexity: http://financialexamhelp123.com/convexity/
s2k thanks for your reply and the link - your site is a great resource
My pleasure.