the term structure of interest rates

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1、Chapter15:TheTermStructureofInterestRatesChapterOpenerp.480PART  IVIN  CHAPTER14weassumedforthesakeofsimplicitythatthesameconstantinterestrateisusedtodiscountcashflowsofanymaturity.Intherealworldthisisrarelythecase.Wehaveseen,forexample,thatinlate2009short-termTreasurybond

2、sandnotescarriedyieldstomaturitylessthan1%whilethelongest-termbondsofferedyieldsofabout4.2%.Atthetimewhenthesebondpriceswerequoted,anyway,thelonger-termsecuritieshadhigheryields.This,infact,isatypicalpattern,butasweshallseebelow,therelationshipbetweentimetomaturityandyield

3、tomaturitycanvarydramaticallyfromoneperiodtoanother.Inthischapterweexplorethepatternofinterestratesfordifferent-termassets.Weattempttoidentifythefactorsthataccountforthatpatternanddeterminewhatinformationmaybederivedfromananalysisoftheso-calledtermstructureofinterestratesT

4、hepatternofinterestratesappropriatefordiscountingcashflowsofvariousmaturities.,thestructureofinterestratesfordiscountingcashflowsofdifferentmaturities.   WedemonstratehowthepricesofTreasurybondsmaybederivedfrompricesandyieldsofstrippedzero-couponTreasurysecurities.Wealsoex

5、aminetheextenttowhichthetermstructurerevealsmarket-consensusforecastsoffutureinterestratesandhowthepresenceofinterestrateriskmayaffectthoseinferences.Finally,weshowhowtraderscanusethetermstructuretocomputeforwardratesthatrepresentinterestrateson“forward,”ordeferred,loans,a

6、ndconsidertherelationshipbetweenforwardratesandfutureinterestrates.Chapter15:TheTermStructureofInterestRates15.1TheYieldCurveFigure14.1demonstratedthatbondsofdifferentmaturitiestypicallysellatdifferentyieldstomaturity.Whenthesebondpricesandyieldswerecompiled,long-termbonds

7、soldathigheryieldsthanshort-termbonds.PractitionerscommonlysummarizetherelationshipbetweenyieldandmaturitygraphicallyinayieldcurveAgraphofyieldtomaturityasafunctionoftimetomaturity.,whichisaplotofyieldtomaturityasafunctionoftimetomaturity.Theyieldcurveisoneofthekeyconcerns

8、offixed-incomeinvestors.Wewillseeinthischapterthattheyieldcurveiscentraltobondvaluationan