The formula to calculate the price value basis point is:
\[ PVBP = MD \times DP \times 0.0001 \]
Where:
PVBP, short for price value basis point, is a measure of the price sensitivity of a bond. It depends on both the modified duration and the dirty price. The dirty price is the price paid for the bond after taking into account the total accrued interest on the date of the purchase.
Let's assume the following values:
Using the formula to calculate the PVBP:
\[ PVBP = 5 \times 1000 \times 0.0001 = 0.5 \]
The price value basis point is 0.5.
