Term Structure and the Volatility of Interest Rates参考.ppt

Term Structure and Volatility of Interest Ratesby Frank J. Fabozzi Chapter 8 Term Structure and the Volatility of Interest Rates Major learning outcomes: Yield curve (shapes and shifts) LIBOR and swap curves Basic understanding of term structure theories (pure expectations, liquidity preference, preferred habitat (market segmentation) Measuring yield curve risk Key Learning Outcomes Illustrate and explain parallel and nonparallel shifts in the yield curve, a yield curve twist, and a change in the curvature of the yield curve (i.e., butterfly shift). Describe and explain the factors that have been observed to drive zero-coupon U.S. Treasury returns and discuss the relative importance of each factor. Explain the various universes of Treasury securities that are used to construct the theoretical spot rate curve, and discuss their advantages and disadvantages. Explain the swap rate curve (LIBOR curve) and discuss the reasons that market participants have increasingly used the swap rate curve as a benchmark rather than a government bond yield curve. Key Learning Outcomes Explain the various theories of the term structure of interest rates (i.e., pure expectations theory, liquidity preference theory, preferred habitat theory, and market segmentation) and the implications of each theory for the shape of the yield curve. Compute the effects of how to measure the yield curve risk of a security or a portfolio using key rate duration. Compute and interpret the yield volatility given historical yields. Differentiate between historical yield volatility and implied yield volatility. Explain how yield volatility is forecasted. Yield Curve Shapes Historically, four shapes have been observed for the yield curve: normal or positively sloped (i.e., the longer the maturity, the higher the yield), (2) flat (i.e., the yield for all maturities is approximately equal), (3) inverted or negatively sloped (i.e., the longer the maturity, the lower the yield), and (4) a humped