Which one of the four following statements about Basis point values is correct?

Which one of the four following statements about Basis point values is correct?

Basis point value:
A . Is a widely used statistical tool used to measure market risk.
B . Refers to the change in the value of a fixed income position for a very small change yields.
C . Is a risk sensitivity measure used to measure the point spread risk in the banking book.
D . Provides a quick estimate of the sensitivity of the bank’s banking book, to increasing volatility in
interest rates.

View Answer

Answer: B

Explanation:

Basis point value refers to the change in the value of a fixed income position for a very small change in yields. This measure is crucial in understanding the sensitivity of the position to changes in interest rates, which is a fundamental aspect of fixed income securities and interest rate risk management.