Yield curve: Difference between revisions
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A yield curve describes today’s market rates per annum on fixed rate funds for a series of otherwise comparable securities, having different maturities. | 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: | There are three ways of expressing today’s yield curve: | ||
#Zero coupon yield curve. | |||
#Forward yield curve. | |||
#Par yield curve. | |||
If any one | 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. | ||
The yield curve is sometimes also known as the Term structure of interest rates. | The yield curve is sometimes also known as the Term structure of interest rates. | ||
== See also == | == See also == | ||
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* [[Spread risk]] | * [[Spread risk]] | ||
* [[Zero coupon yield]] | * [[Zero coupon yield]] | ||
Revision as of 10:59, 13 July 2013
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:
- 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.
