Parallel shift in the yield curve

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Parallel shift in the yield curve

A shift in economic conditions in which the change in the interest rate on all maturities is the same number of basis points. In other words, if the three month T-bill increases 100 basis points (one %), then the 6-month, 1-year, 5-year, 10-year, 20-year, and 30-year rates all increase by 100 basis points as well. Related: Non-parallel shift in the yield curve.

Parallel Shift in the Yield Curve

A change in the yield curve for bonds with different maturities in which the changes in yields occur evenly. For example, given a yield curve for bonds with one-year, five-year, and 10-year maturities, a parallel shift in the yield curve occurs when the yields for all three bonds increase 10 basis points each. See also: Nonparallel Shift in the Yield Curve.
References in periodicals archive ?
ISLAMABAD -- Capital Administration and Development Division (CADD) on Monday decided to move evening classes in morning shift as it is not feasible to run two parallel shifts in Islamabad Model schools and colleges.
2, with parallel shifts upward of 0, 2, and 4 percent in the yield curve.
mortality patterns, a parallel shift in yield curve), the marking-to-market (MTM) procedure could mean that the longevity swap switches status in the hedger's balance sheet between that of an asset and that of a liability.
Everywhere you go in Richmond, and elsewhere in Virginia, you hear hints of similar, parallel shifts.
In addition, CMRA demonstrates by use of simple example that Farmer Mac's MVE test -- Farmer Mac's primary test of its interest-rate risk which assumes parallel shifts in the yield curve -- is not the most stressful interest rate shock test despite management's public statements to the contrary.
Thus the price of a zero-coupon bond is more sensitive to parallel shifts in interest rates than, say, a 10% bond.
The same result: "matching the duration of a portfolio can hedge the portfolio to small parallel shifts of the term structure.
Mismatched convexity: "Convexity is how much duration will change for small parallel shifts in the term structure.
This technique is used to gauge the changes in the value of an asset or portfolio of assets that occur in response to a parallel shift in interest rates.
average life" test); (2) an expected weighted-average life that extends by more than four years or shortens by more than five years assuming immediate and sustained parallel shifts in the yield curve of plus or minus 300 basis points, respectively (i.
Because the quantitative criteria do not sufficiently distinguish between high-risk derivatives and "plain vanilla" pass-throughs, MBA believes the average life and average life sensitivity criteria for defining high risk should be amended using GNMA and conventional pass-throughs as benchmarks as follows: (1) a derivative product with an average life of more than 12 years; and (2) a weighted-average life that extends or shortens by more than six years assuming a gradual but parallel shift in the yield curve of plus or minus 300 basis points.
Recent enhancements include the addition of more robust handling of the initial yield curve, support for key rate and parallel shifts to the yield curve, as well as support for larger simulations.