Yield curve: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson m (Change second 'usually' to 'often'.) |
imported>Doug Williamson m (Spacing and punctuation.) |
||
| Line 10: | Line 10: | ||
If any one of the curves is known then each of the other two can be calculated by using no-arbitrage pricing assumptions. | If any one of the curves is known, then each of the other two can be calculated by using no-arbitrage pricing assumptions. | ||
The shape of today's yield curve is influenced by - but not entirely determined by - the market's expectations about future changes in market rates. | The shape of today's yield curve is influenced by - but not entirely determined by - the market's expectations about future changes in market rates. | ||
Revision as of 11:01, 13 July 2013
Market rates for different maturities of funds are usually different, with longer term rates often - but not always - being higher.
A yield curve describes today’s market rates per annum on fixed rate funds for a series of otherwise comparable securities, having different maturities.
There are three ways of expressing today’s yield curve:
- Zero coupon yield curve.
- Forward yield curve.
- Par yield curve.
If any one of the curves is known, then each of the other two can be calculated by using no-arbitrage pricing assumptions.
The shape of today's yield curve is influenced by - but not entirely determined by - the market's expectations about future changes in market rates.
The yield curve is sometimes also known as the Term structure of interest rates.
