I'm trying to calculate a PC1 equivalent of a DV01 move and am getting a bit confused by the interpretation of the eigenvectors. The output of the first two eigenvectors are,
Tenor PC2 PC1
1Y -0.15028 0.05154
2Y -0.32138 0.13310
3Y -0.41856 0.20852
5Y -0.41465 0.26116
7Y -0.33315 0.29555
10Y -0.19980 0.31919
15Y -0.04874 0.33416
20Y 0.08760 0.34173
If I want to calculate a DV01 equivalent assuming the 5Y curve moves by 1bp, do I simply scale the eigenvectors till I get an appropriate move for the 5Y point. In other words, do the tenor shocks become,
0.197343561
0.509633359
0.798451041
1
1.131677872
1.222203892
1.279510769
1.308506297
Or do I use the method described here PCA? In which case, the tenor shocks become,
0.071660453
0.336473214
0.707324248
1
1.204548309
1.340536029
1.429582409
1.489268877
I am confused which one is the correct method. Would appreciate any thoughts.
Thank you in advance.