term structure of interest rates


Also found in: Acronyms.

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.

term structure of interest rates

term structure of interest rates

the relationship between the EFFECTIVE INTEREST RATE (yield) on a FINANCIAL SECURITY and the unexpired length of time to its maturity. This relationship is known as yield to maturity and can be calculated only for securities that have a fixed rate of interest and specified date of maturity, such as TREASURY BILLS and corporate DEBENTURES. CONSOLS are a notable exception as they do not have a redemption date.
References in periodicals archive ?
This model of the term structure of interest rates with a time-varying quantity of bond risk however does not generate enough variability in nominal bond risk premia (or expected nominal bond excess returns) to match the variability uncovered by predictive regressions of nominal bond excess returns on lagged nominal yield spreads and forward rates.
For the entire sample period, there are strong liquidity effects for the entire term structure of interest rates with the short end having a slightly higher effect.
Shocks to the net supply of, or demand for, bonds of one maturity do not affect other yields, nor the shape of the term structure of interest rates.
A Model of Targer Changes and the Term Structure of Interest Rates.
So, if liquidity is an important factor determining the returns of financial assets, liquidity may also be important for yield spreads and the term structure of interest rates.
This framework has also been adapted to foreign exchange market anomalies and, as we see in the next paper, the unexplained high volatility of the term structure of interest rates.
Ravenna and Seppala (2006) is one recent example of studying the term structure of interest rates in a consumption-based model that endogenizes consumption--the papers mentioned in the previous two paragraphs treat consumption (and inflation) as exogenous.
The purpose of this article is to show how to use absence-of-arbitrage conditions to solve for the term structure of interest rates in a discrete-time setting and to do so in a way that is largely independent of the time step.
If the term structure of interest rates is determined by market expectations, these expectations may be inferred from the shape of the yield curve.
Ross, 1981, A Re-Examination of Traditional Hypotheses About the Term Structure of Interest Rates, Journal of Finance, 36: 769-799.
The second market condition that affects the price of the call option is the shape of the term structure of interest rates.
The results of this paper suggest that the expectations hypothesis provides a good description of the term structure of interest rates in New Zealand during recent times.