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.
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🏦 Fixed income market guide
Fixed income
derivatives
marketplace.
Measure sensitivity, not just face value.
Fixed income derivatives may reference rates, bond prices, or credit-related measures. Two positions with equal notional amounts can have different sensitivities to changes in yields. Identify the risk factor and the assumptions behind duration or DV01 before comparing contracts.
Three things to understand
Read these before the price.
01
Duration
A local approximation of price sensitivity to yield changes.
02
DV01
An approximate dollar effect for a one-basis-point move.
03
Curve exposure
Different maturities need not move in parallel.
A practical comparison
A numerical hedge ratio is only a starting point for research. Ask whether the portfolio and contract respond to comparable risk factors, then consider curve changes, cash requirements, and execution. Matching one sensitivity does not prove that every possible loss has been offset.
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.
A fictional $200,000 portfolio with modified duration five has an approximate $2,000 loss for a 20-basis-point parallel yield rise, ignoring convexity and other changes.
Examples are simplified and exclude fees unless stated. Actual payoff formulas, margin rules, and eligibility vary. Read risk information.
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Fixed income & bonds explained.
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