PVBP/Dollar Duration - confusion over how many decimal places for Basis Points

DD = Value x modified Duration x 0.01

That is for 1%. But We can also write it as 1BPS which would be 0.0001

Which is the correct method? Especially if they give you the options in MCQ?

Following from this - I got the following wrong…

Imagine we have a bond with Price of 102.36. Each holding is of size 1m par value. The Modified Duration is 3.7

What is the DD?

I said, 1m x 102.36 = 102,360,000 x 3.7 x 0.0001 = 37,873

The answer says it is 3,783,000 (so multiplied by 0.01)

Money duration is times 0.01, i.e. 1% change in rates.

PV01 (PVBP) is times 0.0001, i.e. 0.01% change in rates.

So you calculated PVBP in this question while it asked for money duration.

How interesting, I did not realize there was any difference!

This question specifically asked for the Money Duration. I thought Money Duration was the same as Dollar Duration = PVBP=DO1

Very confused.

Yeah so just divide by 100 again for PVBP. There was some earlier discussion on this see https://www.analystforum.com/forums/cfa-forums/cfa-level-iii-forum/91365320 towards the bottom.

For MCQ it shouldn’t matter because you see the overall number, for AM it might cost you 1 point for wrong scaling.

Just to make terminology clear:

Money duration = dollar duration

PVBP = DV01/PV01

Thanks Moonborne, that link is the exact question I was referring to.

You’ve helped alot!