A Guide to Duration, DV01, and Yield Curve Risk Transformations

Posted on May 20, 2011 by Thomas Coleman

Yield curve risk and sensitivities (DV01s) can be measured with respect to different variables: forward rates, par rates, zero yields, or others. This paper describes a simple method for transforming sensitivities between alternate representations and provides examples. The benefit of this transformation method is that it only requires calculating the risk of a small set of alternate instrument and does not require re-calculating the original portfolio risk.

This is a 35-page paper is available as a .pdf here on the CloseMountain site and also on SSRN. A digitally enhanced version in .cdf/.nbp format is also available with dynamic interactivity enabled (requires free Wolfram Player).

About Thomas Coleman

Thomas S. Coleman is Senior Advisor at the Becker Friedman Institute for Research in Economics and Adjunct Professor of Finance at the Booth School of Business at the University of Chicago. Prior to returning to academia, Mr. Coleman worked in the finance industry for more than twenty years with considerable experience in trading, risk management, and quantitative modeling. Mr. Coleman earned a PhD in economics from the University of Chicago and a BA in physics from Harvard College.
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One Response to A Guide to Duration, DV01, and Yield Curve Risk Transformations

  1. Kent Ennis says:
    May 26, 2015 at 11:53 pm

    My humble apology for my earlier post. I see the file. Thanks.

    Kent

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