Yield curve
Market rates for different maturities of funds are usually different, with longer term rates usually - 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: i. Zero coupon yield curve. ii. Forward yield curve. iii. Par yield curve.
If any one curve 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.
See also
- Bootstrap
- Expectations theory
- Falling yield curve
- Fisher-Weil duration
- Forward yield
- Inverse yield curve
- Negative yield curve
- Net interest risk
- Par yield
- Positive yield curve
- Riding the yield curve
- Spread risk
- Zero coupon yield
