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Fixed Income > YCM 2001 - Yield Curve Theories

Fixed Income > YCM 2001 - Yield Curve Theories

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Published by: api-27174321 on Oct 18, 2008
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03/18/2014

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Theories of the Yield Curve
Copyright \u00a9 1996-2006
Investment Analytics
How is the curve constructed?
The Yield Curve
\ue000
What is the yield curve?
\ue000
Copyright \u00a9 1996-2006 Investment Analytics
Yield Curve Theories
Slide: 2
\ue000
Why is the yield curve shaped the way
it is?
\ue000
Why does its shape change?
\ue000
How can a trader profit from this?
Copyright \u00a9 1996-2006 Investment Analytics
Yield Curve Theories
Slide: 3
\ue000Zero-Coupon Bonds, Face Value $1,000:
\ue000Term
Price
Discount
YTM
1
925.93
1/(1+ y1)
8.000%
2
841.75
1/(1+ y2)2
8.995%
3
758.33
1/(1+ y3)3
9.660%
4
683.18
1/(1+ y4)4
9.993%
\ue000Spot Yield (Zero Coupon Yield)
\ue000y1 is called the one year spot rate
\ue000y2 is called the two year spot rate
The Yield Curve

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