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Derivatives

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  • September 3, 2021
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Present Value of a Basis Point

The dollar amount by which the market value of a $100 par bond would change following a change of one basis point in the bond’s yield. This value can be obtained from a bond’s full price (its quoted price plus accrued interest), its modified duration, and one basis point:

DV01= P x DM × 0.0001

where:

P is the bond’s full price
DM is the bond’s modified duration

This value is also known as price value of a basis point.


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