Abstract
What is a risk? Risk, in insurance terms, is the eventuality of a loss or other adverse event that has the potential to interfere with an organization's capacity to fulfill its mandate, and for which an insurance claim may be proposed. What is risk management? Risk management makes certain that an organization understands and identifies the risks to which it is exposed. It also guarantees that the organization creates and implements an effective plan to prevent, reduce, or lessen the impact if a loss occurs. A risk management plan includes techniques and strategies for recognizing and confronting these threats. The DV01, also called dollar value of a basis point move, is a measure showing the dollar value of a basis point decrease in interest rates. It shows the change in a bond's price in comparison with a decrease in the bond's yield. This statistic permits us to measure the interest rate risk, which is calculated through the BVP (Basic Point Value). DV01 is an essential value to the BVP establishment. Advantages: This approach permits the clear highlighting of the higher risk level of $50 million 5 year notes paying 10 (7% - 6m libor) + 3% in comparison with a $100 million 30 year Treasury Bonds as well as a $100 million 90 day T-Bills. The notional approach misses this higher risk level.
