1. What is PVBP (Price Value of a Basis Point)?

Definition: PVBP measures the change in a bond's price for a 1 basis point (0.01%) change in yield.

Purpose: It helps investors and traders understand interest rate risk and the price sensitivity of fixed income securities.

2. How Does the PVBP Calculator Work?

The calculator uses the formula:

Where:

• \( PVBP \) — Price value of a basis point (USD)
• \( \Delta P \) — Price change (USD)
• \( \Delta Y \) — Yield change (basis points)

Explanation: The price change is divided by the yield change to determine the dollar value impact per basis point.

3. Importance of PVBP in Finance

Details: PVBP is crucial for bond portfolio management, risk assessment, and hedging strategies against interest rate movements.

4. Using the PVBP Calculator

Tips: Enter the observed price change in USD and the corresponding yield change in basis points (default 1 bp). All values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: What's a typical PVBP value?
A: PVBP varies by bond maturity and coupon. A 10-year Treasury might have PVBP around $0.08 per $100 face value.

Q2: How does PVBP relate to duration?
A: PVBP is similar to dollar duration but specifically measures change per basis point rather than percentage point.

Q3: When would PVBP be higher?
A: PVBP increases with longer maturities and lower coupon rates, as these bonds are more sensitive to rate changes.

Q4: Can PVBP be negative?
A: No, PVBP is always positive as it represents the absolute value of price sensitivity.

Q5: How is PVBP used in trading?
A: Traders use PVBP to hedge positions and assess the risk/reward of bond trades in terms of yield changes.