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

Definition: PVBP measures how much the price of a fixed income security changes when the yield changes by 1 basis point (0.01%).

Purpose: It helps investors and portfolio managers understand interest rate risk and the sensitivity of bond prices to yield changes.

2. How Does the 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 price sensitivity per basis point.

3. Importance of PVBP Calculation

Details: PVBP is crucial for risk management, portfolio hedging, and understanding the interest rate sensitivity of fixed income securities.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between PVBP and duration?
A: While both measure price sensitivity, duration measures percentage change while PVBP measures absolute dollar change per basis point.

Q2: Why is PVBP important for VA (Volatility Adjusted)?
A: Volatility adjustment accounts for changing market conditions, making PVBP more accurate in different volatility regimes.

Q3: How does PVBP vary across different bonds?
A: PVBP is higher for longer-duration bonds and bonds with lower coupons, as they're more sensitive to rate changes.

Q4: Can PVBP be negative?
A: While the calculator shows absolute values, PVBP is typically expressed as a positive number representing the absolute price change.

Q5: How often should PVBP be recalculated?
A: For actively managed portfolios, PVBP should be monitored regularly as it changes with market conditions and portfolio composition.