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I understand that zero coupon bond changes as interest rates change. But I am unsure of how to get the delta. Say I buy a 5Y zero coupon bond with notional amount 5M USD. How do I calculate the delta? Interest rates are 2.10%.

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    $\begingroup$ Do you mean duration? $\endgroup$ – Bob Jansen Sep 22 '17 at 16:22
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The delta is (value of bond) - (value of bond if rates go up 1bp) =5mm/(1.0210)^5 - 5mm/(1.0211)^5 =$2206

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  • $\begingroup$ We can also use the equation $\frac{\partial P}{\partial y}=\frac{1}{1+y}MacD \cdot P(y)$. Here $y=0.021$,$MacD = 5$ years since it is a ZCB, $P(y)=\frac{5,000,000}{(1+0.021)^5}$ The result, after division by 10000 to convert to "per basis point" is 2206.9 $\endgroup$ – Alex C Sep 23 '17 at 12:26

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