DV01

DV01, the dollar value of a basis point (also called PV01 or PVBP), measures how much a bond or portfolio's value changes, in currency terms, when yields move by one basis point (0.01 percentage points). Duration gives price sensitivity in percent; DV01 gives it in dollars. Traders use DV01 to size positions, set risk limits, build hedges and construct yield curve trades that are neutral to parallel moves in rates.

The formula#

DV01 ≈ modified duration × market value × 0.0001

Because DV01 is quoted for a one basis point move, a rise in yields of 10 basis points causes a change of roughly 10 × DV01.

DV01 of common instruments#

Figures vary with yields, coupons and contract details.

Hedging with DV01#

To hedge one position with another, match their DV01s:

hedge ratio = DV01 of position / DV01 of hedge instrument

DV01 neutral curve trades#

Yield curve trades are usually weighted so that each leg has the same DV01. This removes exposure to parallel shifts and isolates the change in the curve's shape.

Key rate DV01#

A portfolio's total DV01 assumes all yields move together. Key rate DV01 (or bucketed DV01) breaks the sensitivity down by maturity point (2 years, 5 years, 10 years, 30 years), showing exposure to curve twists. Risk managers use it to spot hidden curve bets. See Yield Curves.

Credit DV01 (CS01)#

For corporate bonds and credit default swaps, CS01 measures the change in value for a one basis point change in credit spreads, separate from interest rate DV01. See Credit Spreads and Credit Default Swaps (CDS).

Why traders prefer DV01#

• Comparable: dollar risk can be added across positions.
• Actionable: hedge sizes come directly from DV01 ratios.
• Limit friendly: desks set limits in DV01, such as "no more than $50,000 per basis point".

Limits#

DV01 is a linear measure. For large moves, convexity changes DV01 itself, and hedges need rebalancing. See Convexity.

Frequently asked questions#

What is DV01?#

The dollar value of a one basis point change in yield: how much a bond or portfolio gains or loses when yields move by 0.01 percentage points.

How do you calculate DV01?#

Multiply modified duration by market value and by 0.0001.

How is DV01 used in hedging?#

By dividing the DV01 of the position by the DV01 of the hedge instrument to find how many units of the hedge are needed.

Next, learn how yields vary by maturity in Yield Curves.