term structure of interest rates

Term Structure of Interest Rates

A yield curve displaying the relationship between spot rates of zero-coupon securities and their term to maturity.

Notes:

The resulting curve allows an interest rate pattern to be determined, which can then be used to discount cash flows appropriately. Unfortunately, most bonds carry coupons, so the term structure must be determined using the prices of these securities. Term structures are continuously changing, and though the resulting yield curve is usually normal, it can also be flat or inverted.

See also: Coupon, Discounted Cash Flow - DCF, Heath-Jarrow-Morton (HJM) Model, Interest Rate, Liquidity Preference Theory, Maturity, Spot Rate, Yield Curve

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Term structure of interest rates

Relationship between interest rates on bonds of different maturities, usually depicted in the form of a graph often called a yield curve. Harvey shows that inverted term structures (long rates below short rates) have preceded every recession over the past 30 years.

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term structure of interest rates

See yield curve.