Why do hedge calculations often use dollar duration or DV01 instead of just modified duration?

Modified duration gives relative sensitivity. Hedging needs absolute exposure.

Suppose one position is 3,000,000 par and another is 12,000,000 par. Even if the first bond has slightly higher modified duration, the second position may create more total rate risk because the holding size is much larger.

That is why desks convert sensitivity into money terms:

• modified duration tells you percent impact
• dollar duration tells you currency impact for a large yield move scale
• DV01 tells you currency impact per basis point

If Northline Bank Treasury Desk wants to neutralize a 75,000 DV01 exposure, it needs the hedge instrument's DV01, not just its modified duration, because hedge sizing happens in money terms.