Basis point value (BPV or DV0 1) refers to the absolute change of bond price caused by every change of accrual rate by one basis point, that is, the change value of bond price when 0.0 1 percentage point changes. The base point price value is the absolute value of price change.
Like duration, DV0 1 measures the sensitivity of fixed-income assets to changes in interest rates. The difference is that DV0 1 represents the change of absolute currency, while duration represents the relative change, that is, percentage.
Calculate the value of 2 basis points.
The base point value can be calculated according to the following formula:
P- is the value of the bond portfolio after the yield moves down 1bp;
P+ is the value of the bond portfolio after the yield moves up 1bp.
The above formula comprehensively considers the rise and fall of yield, and DV0 1 is calculated as the average value of bond portfolio changes caused by the rise and fall of yield.
Similarly, we can apply the above formula and principle to the calculation of DV0 1 of treasury bond futures:
Therefore, the DV0 1 of treasury bonds futures is the DV0 1 of CTD bonds divided by the conversion coefficient. There is also a 0-based assumption in this conclusion. If the basis is not 0, the relationship between DV0 1 of treasury bonds futures and DV0 1 of CTD bonds may not be so obvious.
Generally speaking, the price of CTD bonds will change after the yield changes 1bp. If there is no arbitrage, the price of treasury bonds futures will change accordingly, so the price of treasury bonds futures will also change after the yield changes 1bp. We can use DV0 1 to measure the absolute change of treasury bond futures when the yield changes.
situation
The duration of CTD coupon is 6.23, and the conversion coefficient is 1.2, 1 ten thousand yuan. The DV0 1 of CTD is 622.3 yuan. What is the DV0 1 of treasury bond futures?
622.3/ 1.2=5 18.58 (yuan)
skill
Relative value change (duration) and absolute value change (DV0 1)
For example, if a bond manager sees that the duration of the bond portfolio is 5 and the value of the bond portfolio is 1 100 million yuan, then it can be considered that if the yield increases 1bp, the value of the bond portfolio decreases by about 0.05% and the DV of the asset portfolio is 50,000 yuan, then the value of the bond portfolio will decrease by about 50,000 yuan. In contrast, duration tells the bond manager the proportion of asset price changes, and DV0 1 tells him the size of actual value changes. We can't say which index is better, but in general, it can make bond investors look at the changes in the market more comprehensively. For example, if an asset scale is particularly large, a small change in the proportion will have a great impact on the absolute value of profit and loss, which will have a great impact on the entire portfolio; On the other hand, if the scale of an asset is relatively small, even if the value of a very large proportion of assets changes, from the perspective of DV0 1, the risk is still controllable for the whole portfolio.