each cash flow is received, times its present value Year 1: 1 * $46.95 = 46.95 Year 2: 2 * $44.08 = 88.17 Year 3: 3 * $41.39 = 124.18 Year 4: 4 * $38.87 = 155.46 Year 5: 5 * 766.37 = 3831.87 TOTAL: 4246.63 3. Compare the total from step 2 with the bond value (step 1) Macaulay duration: 4246.63 / 937.66 = 4.53 Money duration The , or or Bloomberg , also called or in the United States, is defined as negative of the derivative of the value with respect to yield: so that it is the product of the modified duration and the price (value): ($ per 1 percentage point change in yield) or ($ per 1 basis point change in yield) The DV01 is analogous to the delta in derivative pricing (one of the "Greeks") – it is the ratio of a price change in output (dollars) to unit change in input (a basis point of yield). Dollar duration or DV01 is the change in price in dollars, not in percentage. It gives the dollar variation in a bond's value per unit change in the yield. It is often measured per 1 basis point - DV01 is short for "dollar value of an 01" (or 1 basis point). The name BPV (basis point value) or Bloomberg "Risk" is also used, often applied to the dollar change for a $100 notional for 100bp change in yields - giving the same units as duration. PV01 (present value of an 01) is sometimes used, although PV01 more accurately refers to the value of a one dollar or one basis point annuity. (For a par bond and a flat yield curve the DV01, derivative of price w.r.t. yield, and PV01, value of a one-dollar annuity, will actually have the same value.) DV01 or dollar duration can be used for instruments with zero up-front value such as interest rate swaps where percentage changes and modified duration are less useful. Application to value-at-risk (VaR) Dollar duration is commonly used for value-at-risk (VaR) calculation. To illustrate applications to portfolio risk management, consider a portfolio of securities dependent on the interest rates as risk factors, and let denote the value of such portfolio. Then the exposure vector has components Accordingly, the change in value of the portfolio can be approximated as that is, a component that is linear in the interest rate changes