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CFA Level I · CFA Level I Exam · Introduction to Risk Management

A bank's treasury reports that a 1 basis point fall in yields raises its bond holdings' value by GBP 40,000. This sensitivity measure is best described as:

This is the basis point value (PVBP) of the holdings. It states the change in value for a one basis point move in yield, making it a sensitivity measure rather than a tail loss or benchmark tracking measure.

  1. Athe basis point value (PVBP) of the holdingsCorrect
  2. Bthe conditional value at risk of the holdings
  3. Cthe tracking error of the holdings

Explanation

Basis point value measures the change in value for a 1 bp change in yield, a sensitivity measure. CVaR is a tail loss measure and tracking error is relative return volatility versus a benchmark.

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