QRT S.08.01 - C0120.

Question 1:

Delta is defined as the measure of the rate of change of option value with respect to changes in the underlying asset's price. Moreover Delta measures the exposure on the underlying asset. In case of swaptions and cap/floors the underlyings are interest rates and the Delta is more a sensitivity to interest rates changes than the exposure to an underlying asset, indeed such options affect the duration of a portfolio not its allocation. We kindly propose to avoid filling in the Delta in case of interest rate options for which the DV01 (dollar value of one basis point) is more relevant as reported in question 2.

Question 2:

QRT S.08.01 - C0120 and QRT S.06.02 - C0360

Modified duration is the relative change of bond’s price to the change of the yield. In case of interest rate derivatives the price can be either zero (e.g. price at inception  of the most familiar derivatives) or extremely low so the modified duration , when applicable, is not defined or unrealistic. On the other hand the dollar value of one basis point (DV01) is the absolute price’s change with respect to the change in interest rates. It is defined both for bonds and interest rate derivatives and it is used to compute the portfolio’s duration taking into consideration the effect of derivatives. We kindly propose to fill in the modified duration just for bonds and to introduce a new field related to the DV01 to be applied both to bonds and derivatives.