Treasuries Hedging and Risk Management

Hedging interest rate risk with CME Group U.S. Treasury futures begins with identifying the futures contract’s CTD security. Once identified, we can determine the implied basis point value (BVP). BPV is also known as value of a basis point (VBP) or dollar-value of an .01 (DV01). They all refer the same thing, the financial change of the security or portfolio to a change in a 0.01% change in yield. To construct the proper dollar-weighted hedge ratio versus the product or position at risk we need to first determine the BPV.