Fixed income and bond derivatives: duration, DV01, and delivery
Distinguish notional size from rate sensitivity and learn why curve exposure, delivery, and cash timing matter.
7 min read · GuideRead guide ↗
📉 Bonds market guide
Bonds
derivatives
marketplace.
Understand the deliverable and the cash flow.
Bond futures can involve eligible securities and conversion-factor rules rather than one permanently fixed bond. A contract’s sensitivity can depend on its relevant deliverable security. A bond-related derivative should not be confused with owning a coupon-paying bond.
Three things to understand
Read these before the price.
01
Deliverable basket
Read the securities eligible under the contract.
02
Conversion factors
Understand their role in delivery economics.
03
Sensitivity changes
A fixed label does not imply a permanently fixed DV01.
A practical comparison
Separate government rate exposure from the credit risk of a specific issuer. Then map the contract’s final trading, notice, and settlement events. A future may require cash while the underlying portfolio’s gains remain unrealized or unavailable for transfer.
Use the learning center to clarify unfamiliar terms and the source library to continue with official documentation. This page explains mechanics, not a current product ranking or trading recommendation.
Hypothetical teaching example
Make the exposure visible.
If an illustrative portfolio has $1,000 of comparable DV01 and a future has $50, the ratio is 20. This arithmetic is not a recommended hedge and depends on matching risk assumptions.
Examples are simplified and exclude fees unless stated. Actual payoff formulas, margin rules, and eligibility vary. Read risk information.
Go deeper
Fixed income & bonds explained.
Continue exploring