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  • DV01: The price value of basis point (PVBP) or dollar value of basis point (DV01) change is the absolute change in the bond price from one basis point change in yield.
    • DV01 = | price at YTM0 – price at YTM1 |
      • YTM0 = the initial YTM
      • YTM1 = the YTM 1 basis point above or below YTM0 (YTM1 = YTM0 ± 0.0001)

DV01 – Application to hedging


  • Hedge ratio is calculated using DV01 with the help of following relation


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