This measure is the absolute value of the change in price of a bond for a one basis point change in yield. It is another way to measure interest-rate risk. It does not matter if it is an increase or decrease in rates, because such a small move in rates will be about the same in either direction according to the second property of a bond's price . This is also know as Dollar Value of an 01 (DV01).
|PVBP = initial price - price if yield is changed by 1 basis point|
Example: Price Value of a Basis Point
Assume that the initial price is 98 and the new price is 97.75. Because of a 1 bps increase in rates the PVBP would be .25 (98 - 97.75).
DV01 is related to duration. It is just a special case of dollar duration. Instead of using a 100 basis point change you are simply using a 1 basis point change.
An example using the Stone & Co. bonds with duration of 5.5
5.5 x 0.0001 x 100 = .055% change
If the price was 98 the dollar price change would be:
.055% x 98 = $ 0.53
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