Lesson 3 of 6 · All lessons in this module
- From Macaulay duration to modified durationVideo lesson
- Approximate modified durationVideo lesson
- Money duration and the price value of a basis pointVideo lesson
- Integrated cases: duration of a bond bought mid-period
- Duration of zero-coupon, perpetual and floating-rate bonds
- How maturity, coupon and yield drive duration
Lesson 3 of 6 · 12 min
Money duration and the price value of a basis point
Money duration turns modified duration into a currency amount for a whole position, and the PVBP gives the price change for a single basis point.
In short
- Money duration = AnnModDur × full price (per 100 of par, or the market value of the position).
- Estimated change in value (currency) ≈ −MoneyDur × ΔYield. In the US it is called dollar duration.
- PVBP = (PV₋ − PV₊) ÷ 2, with prices repriced at ±1 bp. Also called PV01 or DV01.
- Basis point value (BPV) = money duration × 0.0001.
- A bond with lower modified duration can still carry more currency risk if the position is larger.
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