Term
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Definition
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Term
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Definition
Term structure of interest rates is based on current expectations of future short-term rates
Expected short term rates:
1. Rise, yield curve slopes upward
2. Constant, flat yield curve
3. Fall, yield curve slopes down |
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Term
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Definition
Long term interest rates should be higher than short term rates
1. Savers require compensation for giving up liquidity, longer term = more compensation
2. Long term bonds are more sensitive to interest rate changes than short term bonds
Term premium applied to yield curves |
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Term
| Market Segmentation Theory |
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Definition
| Different demands for bonds of different maturities |
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