Interpreting the Sign of Payer and Receiver Swap DV01

Summary

This note addresses why a payer swap can show negative DV01, or a short payer can show positive DV01, despite the usual intuition about payer and receiver positions. The explanation hinges on the sign convention: the quoted sensitivity is expressed relative to a downward shift in rates. Under that convention, a long payer that loses value when rates fall has negative DV01, while the short payer has the opposite sensitivity.

The note also says the displayed DV01 is calculated numerically from the average profit-and-loss change under symmetric rate shocks, rather than as an analytic derivative. That calculation and the direction used to define the shift matter when interpreting the sign. The example illustrates the convention with gains and losses, but gives no broader pricing framework or detailed Bloomberg settings, so users should check the convention attached to any risk report before comparing signs across systems.

Key ideas

• DV01 sign depends on the direction of the rate shift used in its definition.
• A long payer can have negative DV01 when sensitivity is stated for a downward rate move.
• A short payer has the opposite profit-and-loss response to the same move.
• The described DV01 is estimated from symmetric rate shocks rather than an analytic derivative.

Tags

# IRS Payer/Receiver swap dv01


# IRS Payer/Receiver swap dv01












I was just wondering whether it was possible for long payer swaps to have a negative dv01 and vice versa for a short payer to have a positive dv01? Intuitively by definition of payers and receivers I didnt think this was possible, but I was recently pricing some payers/receivers on Bloomberg and saw that this was in fact possible? Any help/insight would be greatly appreciated.

## Answer by oronimbus (score 4, accepted)

https://quant.stackexchange.com/a/75422

The delta/DV01 is expressed with regards to a downward shift in rates. So in this case for a long payer, a 1bp downward shift would result in a loss of \$40k. For the short payer it'd be the opposite, i.e. a \$30k gain.

The DV01 itself is calculated as the average move in P&L for a 10bp shift up and down (i.e. numerically and not analytically).

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

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