Description
Estimate a linear price change from a supplied spread-duration sensitivity.
Financial market terms depend on quote conventions, contract multipliers, rate units, horizons and signed positions. A price gap, intrinsic value or linear sensitivity is a limited scenario term rather than an executable price or complete valuation. Variance, volatility, fractional rates and basis points are different quantities.
Estimate a linear price change from a supplied spread-duration sensitivity.
When to use this tool
Use Implied Spread Price Increment when checking the stated supplied market, valuation or exposure convention.
How to use the tool and how it works
- Enter spreadBasisPoints, suppliedSpreadDurationYears, price. Use the units and conventions below.
- Run the tool. Correct any format, range, or cross-field input error before interpreting the output.
- Read linearPriceChange. Use the output convention below.
Return -price*suppliedSpreadDurationYears*spreadBasisPoints/10000 as a first-order linear price change.1
| Input field | Meaning and units | Accepted input |
|---|---|---|
| spreadBasisPoints | Signed spread change in basis points, converted to a fractional annual rate by division by 10000. | Required. Finite number. |
| suppliedSpreadDurationYears | Supplied Spread Duration Years | Required. Finite number. |
| price | Price | Required. Finite number. |
| Output field | Interpretation | Returned shape |
|---|---|---|
| linearPriceChange | Linear Price Change | Required. Finite number. |
{
"input": {
"spreadBasisPoints": 20,
"suppliedSpreadDurationYears": 5,
"price": 100
},
"output": {
"linearPriceChange": -1
}
}Limitations and assumptions
- Spread is in basis points and duration in years on a compatible annual spread convention; convexity, defaults and other risk factors are omitted.
- Inputs must satisfy both the field types and the cross-field conditions above. Invalid input causes an error; a successful false flag or documented placeholder is a different result.
- Numeric calculations use binary floating point unless exact decimal-integer arithmetic is explicitly stated. No hidden measurement tolerance or decimal rounding is added; nonfinite or out-of-contract results are rejected. Numeric signed-zero results are exported as zero.
Alternative or Complementary methods
Use verified contract/market data and a complete suitable valuation and risk model with qualified financial advice for actual investment or trading decisions.
References
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