as to eliminate any arbitrage profit with spot interest rates
Caption: Figure 5: Swiss Government Bonds: Spot interest rates in percent.
Caption: Figure 6: Non-government CHF bond: spot interest rates in percent.
A term structure of spot interest rates
and their component forward interest rates contain the same information, but expressing rates in forward terms provides a clearer view of the impact of different factors at different horizons.
The data set used in the estimations is composed by the monthly spot interest rates
and the corresponding instantaneous forward rates of the McCulloch U.S.
The term structure of interest rates or zero-coupon yield curve characterizes relation between spot interest rates
in the economy and the term to maturity of default-free fixed income securities in the market.
In this paper, we study the dynamic relationship of interest rate based-survey forecasts and spot interest rates. Our results suggest that these market expectations contain useful information regarding the future evolution of interest rates and also that they may be used to gauge Central Bank credibility.
How do interest rates survey based forecasts interact with spot interest rates? This paper attempts to answer these questions by focusing on the Brazilian economy, which has had an inflation-targeting framework in operation since 1999, and has collected information on market expectations employing surveys since 2001.