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Ok this is much simpler thank you! So the issue w duration is, its non constant, so the relationship betw the moves in the bond's yield and the moves in the price is not consistent. so yield vol is not a good proxy for price Vol, which we want for apples2apples comparison
Duration is not constant but like... it’s not constant in the same way that gravity is not constant (it’s weaker when you go higher). It matters if you are a rocket scientist or a fixed income specialist, if you are just doing some simple analytics it’s not that important imo.
agree with the cephalopod. do not hustle to get precision that is higher than the bid-offer spread + a typical IV/PX gap for the ETF. a lot of us make a living with *good enough* calcs. remember you are px taker not a maker, all you have to know what side of b/o you're on
So if that's the case, maybe I can stick to my original method? Im just trying to see the relationship betw trailing volatility in certain treasuries, w future returns in XLF. Originally I did stdev(Column Of [CurrentYield - priorDayYield]) *sqrt(252)
Your equation is missing the duration adjustment? Diff in yield * duration = % return.
True, a constant duration proxy only becomes a factor over long time horizons. But I'm always looking at long term horizons, so I'm sensitive to it. I also have issues finding historical duration values, especially in high yield.
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A more math-y answer is: see the "quest for invariance"
