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BP Vol vs. Yield Vol
When I was in grad school, volatility was always expressed in % (as yield vol), but when I started working, I saw that interest rate volatility everywhere is expressed in BP (basis point) form. Why do people in the industry prefer BP vol to yield vol (Black vol)?
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- Traden4Alpha
- Posts: 3300
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BP Vol vs. Yield Vol
I'd bet it dates from the pre-decimalization days when everything was integer + fraction. BP and fractional BP provided adequate precision to talk about yields and changes in yields.One could argue that % is just as bogus as BP. Multiplying a number from some mathematical formula by 100 to get % is just as silly as multiplying by 10000 to get BP.Until people evolve metric-decimal fingers, they will prefer integer quantities as the natural basis for counting (and accounting).