What is dollar duration formula?
Ava Robinson
Published Apr 01, 2026
To calculate the dollar duration of a bond you need to know its duration, the current interest rate, and the change in interest rates. Dollar Duration = DUR x (∆i/1+ i) x P. where: DUR = the bond’s straight duration. ∆i = change in interest rates.
How do you calculate dollar basis points?
The calculation is as follows:
- Dollar Value of One Basis Point = Dollar Duration * $1000000*0.0001.
- = $85.84* $1000000*0.0001.
- = $8,584.
What is dollar duration How is dollar duration different from duration?
Dollar duration measures the dollar change in a bond’s value to a change in the market interest rate, providing a straightforward dollar-amount computation given a 1% change in rates. Effective duration is a duration calculation for bonds that have embedded options.
How is portfolio DV01 calculated?
The simplest way to calculate a DV01 is by averaging the absolute price changes of a Treasury security for a one-basis point (bp) increase and decrease in yield-to-maturity. This calculation will measure how much a Treasury security’s price will change in response to a one-bp change in the security’s yield.
How is duration calculated?
The formula for the duration is a measure of a bond’s sensitivity to changes in the interest rate, and it is calculated by dividing the sum product of discounted future cash inflow of the bond and a corresponding number of years by a sum of the discounted future cash inflow.
How do you calculate approximate duration?
duration = dollar duration/price = -p'(y) /p(y) ≈ – percent change in price for 100 bp change in bond yield. This gives the similar formulas as before, except that the security’s yield replaces the zero rates. Yield duration gives the percent change in price for a 100 bp change in the bond’s yield.
What is duration of time?
Duration is how long something lasts, from beginning to end. A duration might be long, such as the duration of a lecture series, or short, as the duration of a party. The noun duration has come to mean the length of time one thing takes to be completed.
