Explanation

Forward Bucket '01 measures the change in bond price when forward rates in a specific bucket shift upward by 1 basis point (0.01%).

Step 1: Calculate the bond's cash flows

• Year 1: Coupon = 5% × CNY 100,000 = CNY 5,000
• Year 2: Coupon = CNY 5,000
• Year 3: Coupon + Principal = CNY 5,000 + CNY 100,000 = CNY 105,000

Step 2: Calculate present value using forward rates

With flat forward rate curve at 3%:

• PV(CF₁) = CNY 5,000 / (1.03) = CNY 4,854.37
• PV(CF₂) = CNY 5,000 / (1.03)² = CNY 4,712.98
• PV(CF₃) = CNY 105,000 / (1.03)³ = CNY 96,194.17

Total PV = CNY 4,854.37 + CNY 4,712.98 + CNY 96,194.17 = CNY 105,761.52

Step 3: Calculate Forward Bucket '01 for 2-3 year bucket

We shift forward rates in the 2-3 year bucket upward by 1 bp:

• Forward rate from year 2 to 3 increases from 3% to 3.01%

New PV calculation:

• PV(CF₁) unchanged = CNY 4,854.37
• PV(CF₂) unchanged = CNY 4,712.98
• PV(CF₃) = CNY 105,000 / [(1.03)² × (1.0301)] = CNY 105,000 / (1.0609 × 1.0301) = CNY 105,000 / 1.0928 = CNY 96,175.07

New Total PV = CNY 4,854.37 + CNY 4,712.98 + CNY 96,175.07 = CNY 105,742.42

Step 4: Calculate Forward Bucket '01

Forward Bucket '01 = Original PV - New PV = CNY 105,761.52 - CNY 105,742.42 = CNY 19.10

This matches option B (CNY 19.11, with minor rounding difference).

Key Insight: Forward Bucket '01 isolates the sensitivity to forward rates in a specific time bucket, unlike DV01 which measures sensitivity to parallel shifts in the entire yield curve.