DV01 and CS01DV01
DV01 is the money gained or lost on a bond position if yields move by one basis point (0.01%). CS01 is the same idea for a one-basis-point change in the credit spread. Traders use them to size and hedge interest-rate and credit risk.
Duration expresses rate risk as a percentage. Traders often prefer money: how many dollars does this position make or lose if yields move by one basis point? That is DV01. CS01 does the same for credit spreads. Because they are in money terms, they can be added across positions and used to size hedges precisely. This entry explains both measures with simple examples.
- Category
- Bonds and Interest Rates
- Reading time
- 4 min
- Also called
- Dollar value of a basis point, Basis point value, Spread duration value
- Updated
DV01 and CS01 in plain words
Duration measures how much a bond’s value is likely to change when rates move; higher duration means more sensitivity.1 DV01 turns that into money for a one-basis-point (0.01%) move. See Duration.
A quick formula: DV01 ≈ duration × market value × 0.0001. Because prices and yields move in opposite directions, a rise in yields means a loss of about DV01 per basis point for a long position.2
How to use DV01, step by step
Find duration and market value
For each position.
Calculate DV01
Duration × market value × 0.0001.
Add across positions
Longs and shorts offset in money terms.
Scale to a move
Loss ≈ DV01 × basis-point change in yield.
Hedge
Choose a hedge size with an equal and opposite DV01. See Hedging.
Do the same for spreads
CS01 for credit spread moves. See Credit Spread.
Worked examples
Example 1 — DV01 of a position
Rate riskA $2 million bond position with a duration of 7.
| DV01 | 7 × $2,000,000 × 0.0001 = $1,400 |
| Yields rise 25 bp | ≈ −$35,000 |
DV01 turns duration into money per basis point.
Example 2 — Sizing a hedge
HedgeA portfolio has a DV01 of $1,400. A hedge instrument has a DV01 of $70 per contract (short position gains when yields rise).
| Contracts to short | $1,400 ÷ $70 = 20 |
Matching DV01 neutralises small parallel rate moves.
Example 3 — CS01
Credit riskA $1 million corporate bond with a spread duration of 5. Its credit spread widens by 40 bp.
| CS01 | 5 × $1,000,000 × 0.0001 = $500 |
| Loss from spread widening | 40 × $500 = $20,000 |
CS01 isolates credit risk from interest-rate risk.
Rate-risk measures
| Aspect | Unit | Best for |
|---|---|---|
| Duration | % price change per 1% yield move | Comparing bonds |
| DV01 | Money per 0.01% yield move | Sizing and hedging positions |
| CS01 | Money per 0.01% spread move | Credit risk |
| Convexity | Curvature | Large moves. See Convexity |
Where traders use them
Risk limits
Desks often set limits in DV01.
Hedging
Offsetting rate risk with futures or swaps.
Relative-value trades
Balancing positions so only the spread matters.
Credit portfolios
Separating rate and credit risk.
Advantages and disadvantages
Advantages
- Expressed in money, so it adds across positions.
- Ideal for sizing hedges.
- Separates rate (DV01) and credit (CS01) risk.
Disadvantages
- Linear approximation; less accurate for big moves.
- Assumes parallel yield moves unless split by maturity.
- Changes as positions and yields change.
Going deeper
Read as far as you need. Each level builds on the one before it.
A basis point
Beginner
One basis point is 0.01 percentage points. A move from 4.00% to 4.25% is 25 basis points.
Key-rate DV01
Intermediate
Splitting DV01 by maturity shows exposure to different parts of the yield curve, useful when curves twist. See 2s10s Spread.
Hedge drift
Advanced
As yields move, durations change, so a DV01-matched hedge drifts and must be rebalanced.
Common mistakes
Mixing percentages and basis points
1 bp = 0.01%.
Ignoring signs
Long bonds lose when yields rise.
Hedging once and forgetting
Rebalance as DV01 changes.
Using DV01 for very large moves
Add convexity.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- DV01 = money change per 1 bp yield move.
- DV01 ≈ duration × market value × 0.0001.
- CS01 = money change per 1 bp spread move.
- Both add across positions and size hedges.
- They are approximations that change over time.
Frequently asked questions
What is the difference between DV01 and duration?
Is PV01 the same as DV01?
Why do traders prefer DV01?
Further learning
- Duration
The percentage version of DV01.
- Credit Spread
What CS01 measures.
- Hedging
Using DV01 to size hedges.
- Convexity
When the linear estimate breaks down.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.