FRM Part I · FRM Exam Part I · Applying Duration, Convexity, and DV01
A bond portfolio has a market value of USD 50 million and a modified duration of 6.0. What is its approximate DV01?
DV01 is approximately USD 30,000. Multiply modified duration of 6.0 by the USD 50 million market value and by one basis point, 0.0001, to get the dollar price change for a one basis point change in yield.
- AUSD 30,000Correct
- BUSD 300,000
- CUSD 3,000
- DUSD 60,000
Explanation
DV01 = modified duration × value × 0.0001 = 6.0 × 50,000,000 × 0.0001 = USD 30,000. USD 300,000 uses a 10 bp move or a decimal slip, and USD 3,000 is off by a factor of ten.
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