What is yield curve?

Yield Curve

In finance, the yield curve is a curve showing several yields or interest rates across different contract lengths (2 month, 2 year, 20 year, etc...) for a similar debt contract. The curve shows the relation between the (level of) interest rate (or cost of borrowing) and the time to maturity, known as the "term", of the debt for a given borrower in a given currency. For example, the U.S. dollar interest rates paid on U.S. Treasury securities for various maturities are closely watched by many traders, and are commonly plotted on a graph such as the one on the right which is informally called "the yield curve." More formal mathematical descriptions of this relation are often called the term structure of interest rates.

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Some articles on yield curve:

Fixed-income Attribution - Attribution On Mortgage-backed Securities - Key Rate Durations
... For managers who need to account for changes in the shape of the yield curve in detail, a single risk measure for interest-rate sensitivity is insufficient and a more detailed way of measuring ... Ho defines a number of maturities on the yield curve as being the key rate durations, with typical values of 3 months, 1, 2, 3, 5, 7, 10, 15, 20, 25 and ... key rate duration measures the effect of a change in the yield curve that is localized at a particular maturity, and restricted to the immediate vicinity of that maturity, usually by having the ...
Fixed-income Attribution - Yield Curve Attribution - Factor-based Attribution
... A factor-based model of yield curve movements is calculated by deriving the covariance matrix of yield shifts at predefined maturities, and calculating the ... corresponds to a fundamental model of the yield curve, and each eigenvector is orthogonal, so that the curve movement on any given day is a linear combination of the basis ... The eigenvalues of this matrix then give the relative weights, or importance, of these curve shifts ...
Yield Curve - Relationship To The Business Cycle
... The slope of the yield curve is one of the most powerful predictors of future economic growth, inflation, and recessions ... One measure of the yield curve slope (i.e ... An inverted yield curve is often a harbinger of recession ...
Bootstrapping (finance)
... is a method for constructing a (zero-coupon) fixed-income yield curve from the prices of a set of coupon-bearing products, e.g ... of spot returns is recovered from the bond yields by solving for them recursively, by forward substitution ... Given that, in general, we lack data points in a yield curve (there are only a fixed number of products in the market) and more importantly these have ...
Immunization (finance) - Immunization in Practice
... type, such as government bonds, by creating long and short positions along the yield curve ... Government Treasury yield curve reveals that more than 90% of the yield curve shifts are parallel shifts, followed by a smaller percentage of slope shifts and a very small percentage of curvature ... durations at the long and short end of the curve, and a matching short position with a duration in the middle of the curve ...

Famous quotes containing the words curve and/or yield:

    In philosophical inquiry, the human spirit, imitating the movement of the stars, must follow a curve which brings it back to its point of departure. To conclude is to close a circle.
    Charles Baudelaire (1821–1867)

    I believe that there is a subtle magnetism in Nature, which, if we unconsciously yield to it, will direct us aright. It is not indifferent to us which way we walk.
    Henry David Thoreau (1817–1862)