So if interest rates change (in either direction) by 1 bp, the price of a $1 million (face value) bond will change (in the opposite direction) by approximately $1,186 Remember: p is the price change of a bond with a par value of 100 when there is a 1% change in the yield. PVBP is the price change of a bond with a par value of 100 when there is a .01% (one basis point) change in the yield. PVBP ($/million) is the price change of a bond with a par value of $1,000,000 when there is a .01% (one basis point) change in the yield. Calculating PVBP for a Portfolio PVBPp = ni PVBPi/100 Where ni = face value of security i Find the PVBP for each security in the portfolio and divide each one by 100. Multiply the PVBP/100 for each security by its face value and sum the total Note that when the market value of a portfolio is higher, the PVBP is greater. This makes sense since it is a measure of the dollar change in value. You will get bigger dollar changes for bigger portfolios.
So if interest rates change (in either direction) by 1 bp, the price of a $1 million (face value) bond will change (in the opposite direction) by approximately $1,186 Remember: p is the price change of a bond with a par value of 100 when there is a 1% change in the yield. PVBP is the price change of a bond with a par value of 100 when there is a .01% (one basis point) change in the yield. PVBP ($/million) is the price change of a bond with a par value of $1,000,000 when there is a .01% (one basis point) change in the yield. Calculating PVBP for a Portfolio PVBPp = ni PVBPi/100 Where ni = face value of security i Find the PVBP for each security in the portfolio and divide each one by 100. Multiply the PVBP/100 for each security by its face value and sum the total Note that when the market value of a portfolio is higher, the PVBP is greater. This makes sense since it is a measure of the dollar change in value. You will get bigger dollar changes for bigger portfolios.
Price-Value-of-a-Basis-Point.docx