DV01 Explained

DV01 (Dollar Value of 1 Basis Point) is the core metric XCCY uses to measure how sensitive a position is to changes in interest rates.

What DV01 is

• DV01 represents how much a position’s value changes for a 0.01% (1bp) parralel shift in rates

• It’s not about profit or loss prediction, but about knowing how much exposure your collateral covers

• Every swap, fixed deposit, or fixed-rate loan in XCCY is tracked in DV01 terms

Why DV01 Matters

1. Risk Measurement

   • Instead of counting notional amounts, XCCY looks at actual rate sensitivity

   • Example: A $1M fixed deposit on a 3-month term has lower DV01 than a $1M 1-year swap because it reacts less to rate moves

2. Margining

   • Collateral requirements are based on DV01, not just size

   • Positions with offsetting DV01 can net risk, lowering collateral needs

3. Capital Efficiency

   • By tracking DV01, the protocol can safely reuse collateral across multiple positions

   • Supports higher LTV for loans and more yield for depositors

4. Portfolio Netting

   • DV01 allows the Risk Engine to combine correlated exposures (e.g., Aave vs Pendle PT) and measure total sensitivity, not individual risks in isolation

Intuitive Analogy

Think of DV01 like insurance coverage for rate moves:

• Your collateral is the insurance fund

• DV01 measures how much potential damage a 1bp change would cause

• The protocol ensures your collateral always covers that “worst-case delta”, no matter the position mix