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DV01 and Interest-Rate DV01: Yield Changes Versus Curve Shifts

Article Quant Q&A · Author: Trajan
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Summary

The document distinguishes DV01, the dollar change in a bond's value for a unit change in yield, from interest-rate DV01, the dollar value change associated with a one-basis-point parallel upward shift in interest rates. The questioner suggests the distinction may be between sensitivity at a point on the yield curve and sensitivity to a parallel move across the curve; the answer defines the measures in those terms.

This is a concise terminology clarification rather than a quantitative worked example. It gives no formulas, instrument-specific calculations, or discussion of how curve construction or key-rate sensitivities affect the measures. Its definitions are useful as a starting point, while practical risk measurement may require clarifying the exact yield input and curve-shock convention used by a particular system.

Key ideas

  • DV01 measures a bond's dollar value change for a unit change in yield.
  • Interest-rate DV01 describes the dollar change for a one-basis-point parallel upward shift in rates.
  • The distinction is between sensitivity to a yield change and sensitivity to a broad curve shift.
  • The document provides definitions but no calculation examples or implementation conventions.

Tags

Fixed incomeRisk managementDerivatives pricing
Full text
# Difference between DV01 and IR DV01


# Difference between DV01 and IR DV01












What is the difference between DV01 and IR DV01? As far as I can see DV01 is at point on the yield curve and IR DV01 represents a parallel shift of the entire yield curve? My understanding is still shaky so some clarification would be greatful as I cannot find this on the internet.

## Answer by Egodym (score 2, accepted)

https://quant.stackexchange.com/a/21676

DV01 is the dollar variation in a bond's value per unit change in the yield. https://en.wikipedia.org/wiki/Bond_duration

IR DV01 is the dollar value change for a 1bp upward parallel shift in interest rates. http://dataforthoughts.blogspot.it/2009/09/economics-of-negative-bond-cds-basis.html

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.