In
finance, basis point value (BPV) denotes the change in the price of a
bond
Bond or bonds may refer to:
Common meanings
* Bond (finance), a type of debt security
* Bail bond, a commercial third-party guarantor of surety bonds in the United States
* Chemical bond, the attraction of atoms, ions or molecules to form chemica ...
given a
basis point
A basis point (often abbreviated as bp, often pronounced as "bip" or "beep") is one hundredth of 1 percentage point. The related term ''permyriad'' means one hundredth of 1 percent. Changes of interest rates are often stated in basis points. If ...
change in the
yield of the bond.
[Martellini, Priaulet, Priaulet, Fixed-income securities. Wiley Finance, page 169]
Basis point value tells us how much money the positions will gain or lose for a 0.01% per annum parallel (i.e. uniform at all durations) movement in the
yield curve
In finance, the yield curve is a graph which depicts how the Yield to maturity, yields on debt instruments - such as bonds - vary as a function of their years remaining to Maturity (finance), maturity. Typically, the graph's horizontal or ...
. It is specified for interest rate risk and quantifies the interest rate risk for small changes in interest rates.
The basis point value of a bond is roughly proportional to its duration.
Notes
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Fixed income analysis
Bond valuation