DV01 (PVBP)
Dollar Value of an 01 — the dollar price change of a bond for a one-basis-point change in yield. Approximates the bond's rate exposure in dollars: the standard risk unit on every fixed-income trading desk.
When to use: Use to size hedges and compare risk across bonds of different prices and durations. A trader long $10mm of a 5-year note with DV01 = $4.40 per $10K face has $4,400 of P&L exposure per basis point of yield move.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| DV01 | Dollar Value of 01 | Dollar price change for a 1-basis-point yield move | $ |
| ModDur | Modified Duration | Price sensitivity coefficient: −(1/P)(dP/dy), in years | years |
| P | Bond Price | Market price of the bond per face value unit | $ |
Real-Life Examples
Example 1: Par Bond DV01
Same 5-year par bond: ModDur = 4.376 years, price = $1,000.
Given
Step-by-Step
Each basis-point yield move shifts the price by about $0.44 per $1,000 face. To hedge a $10mm position you would need an offsetting instrument with DV01 = $4,376 per basis point — equivalent rate exposure.
Frequently Asked Questions
Because a basis point is 1/100th of 1%, or 0.01% = 0.0001 in decimal form. Multiplying by Δy = 0.0001 converts the modified-duration sensitivity to a per-1bp price change.
Conventions vary. Treasury markets often quote DV01 per $1mm face ("the 01 on a million"); corporate markets per $100 or $1,000. Check the convention before sizing — a factor-of-1,000 mismatch is a common error.
DV01 is typically reported as a positive number (the magnitude of price change for a 1bp move). The actual price moves opposite to yield: yield up → price down.