The change in the value of a position for a one basis point move in yield. It is a quick measure of interest rate exposure.
Where you will meet it
DV01 comes up in 19 learning outcome notes across the FRM syllabus.
A few of them:
Properties of Interest Rates FRM Part I · Financial markets and products
“For a one-basis-point rise in yield, the approximate loss is DV01 = Dollar duration × 0.0001.”
How Do Firms Manage Financial Risk? FRM Part I · Foundations of risk management
“For interest rate risk, a borrower with floating debt pays fixed on a swap, and a portfolio is hedged by selling futures until its DV01 matches the target.”
Interest Rates FRM Part I · Valuation and risk models
“Weight the legs by DV01, the dollar value of one basis point, not by face amount, otherwise the position is exposed to parallel shifts.”
Regression Hedging and Principal Component Analysis FRM Part II · Market risk measurement and management
“A DV01-neutral hedge sizes the offsetting position so that its DV01 equals the DV01 of the position being hedged.”
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