Price Value of a Basis Point - PVBP

What is 'Price Value of a Basis Point - PVBP'

Price value of a basis point (PVBP) is a measure used to describe how a basis point change in yield affects the price of a bond.

Also knows as the "value of a basis point" (VBP) or "basis point value" (BPV).

 

Price Value of a Basis Point (PVBP)

BREAKING DOWN 'Price Value of a Basis Point - PVBP'

There is an inverse relationship between bond price and yield. As bond prices decrease, their yields increase and vice versa. The degree of change in bond price for each basis point change in yield is determined by a number of other factors, such as the bond's coupon rate, time to maturity and credit rating.

RELATED TERMS
  1. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote ...
  2. Bond Yield

    The amount of return an investor will realize on a bond. Several ...
  3. Required Yield

    The return a bond must offer in order to be a worthwhile investment. ...
  4. Dollar Price

    The percentage of par, or face value, at which a bond is quoted. ...
  5. Yield Basis

    A method of quoting the price of a fixed-income security as a ...
  6. Negative Bond Yield

    A negative bond yield is an unusual situation in which issuers ...
Related Articles
  1. Markets

    Bond Basics: Yield, Price And Other Confusion

    Investopedia Explains: Bond yield, Bond price, yield to maturity, the link between price and yield and bond price in the market.
  2. Markets

    Understanding the Different Types of Bond Yields

    Any investor, private or institutional, should be aware of the diverse types and calculations of bond yields before an actual investment.
  3. Markets

    A Common Base for Understanding Changes in Value

    A discussion of basis points as well as basis point calculations using Excel.
  4. Markets

    Understanding Interest Rates, Inflation And Bonds

    Get to know the relationships that determine a bond's price and its payout.
  5. Managing Wealth

    Understanding Bond Prices and Yields

    Understanding this relationship can help an investor in any market.
  6. Managing Wealth

    Find The Right Bond At The Right Time

    Find out which bonds you should be investing in and when you should be buying them.
  7. Markets

    Comparing Yield To Maturity And The Coupon Rate

    Investors base investing decisions and strategies on yield to maturity more so than coupon rates.
  8. Markets

    Simple Math for Fixed-Coupon Corporate Bonds

    A guide to help to understand the simple math behind fixed-coupon corporate bonds.
  9. Managing Wealth

    How Bond Prices and Yields Work

    Understanding bond prices and yields can help any investor in any market.
  10. Managing Wealth

    How To Evaluate Bond Performance

    Learn about how investors should evaluate bond performance. See how the maturity of a bond can impact its exposure to interest rate risk.
RELATED FAQS
  1. Why are bond yields calculated in terms of basis points?

    Find out why financial analysts and publications track and quote bond yields in basis points, or bps, rather than simply ... Read Answer >>
  2. What is a basis point (BPS)?

    A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial ... Read Answer >>
  3. What causes a bond's price to rise?

    Learn about factors that influence the price of a bond, such as interest rate changes, credit rating, yield and overall market ... Read Answer >>
  4. Should investors focus more on the current yield or face value of a bond?

    Find out when investors should focus on a bond's current yield versus its face value, including an example of how current ... Read Answer >>
  5. What is the difference between yield to maturity and the coupon rate?

    Read about some of the basic differences between a debt security's coupon rate and its yield to maturity, and learn which ... Read Answer >>
  6. How does a bond's coupon interest rate affect its price?

    Find out why the difference between the coupon interest rate on a bond and prevailing market interest rates has a large impact ... Read Answer >>
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center