Fan chart and Zero coupon yield: Difference between pages

Revision as of 12:39, 11 November 2015

The rate of return on an investment today, for a single cashflow at maturity of the instrument.

Equal to the current market rate of return on zero coupon bonds of the same maturity.

Example

The zero coupon yield for the maturity 0-3 periods is 2% per period.

This means that a deposit of £1,000,000 at Time 0 periods on these terms would return:

£1,000,000 x 1.02³

= £1,061,208 at Time 3 periods.

(No intermediate interest is payable.)

An application of zero coupon yields is the pricing of zero coupon bonds.

The zero coupon rate is also known as the Zero coupon rate, spot rate, or spot yield.

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-''Forecasting''.
+The rate of return on an investment today, for a single cashflow at maturity of the instrument.
-Fan charts are designed to illustrate the risks surrounding forecasts, often based on past forecast errors.
+Equal to the current market rate of return on zero coupon bonds of the same maturity.
-They show a central best-estimated future path, together with widening bands around it, indicating the probabilities and confidence intervals around the central forecast.
+'''Example'''
+The zero coupon yield for the maturity 0-3 periods is 2% per period.
+This means that a deposit of £1,000,000 at Time 0 periods on these terms would return:
+£1,000,000 x 1.02<sup>3</sup>
+= £1,061,208 at Time 3 periods.
+(No intermediate interest is payable.)
+An application of zero coupon yields is the pricing of zero coupon bonds.
+The zero coupon rate is also known as the Zero coupon rate, spot rate, or spot yield.
 == See also ==
-*[[Chart]]
+* [[Bootstrap]]
-*[[Confidence interval]]
+* [[Flat yield curve]]
-*[[Consensus forecast]]
+* [[Forward yield]]
-*[[Forecast]]
+* [[Par yield]]
+* [[Spot rate]]
-[[Category:Knowledge_and_information_management]]
+* [[Yield curve]]
-[[Category:The_business_context]]
+* [[Zero]]
+* [[Zero coupon bond]]