Subject category:
Finance, Accounting and Control
Published by:
Centre for Islamic Banking and Finance
Length: 12 pages
Data source: Generalised experience
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Abstract
Yield curves play a central role in the valuation of financial assets. They are heavily influenced by the term structure of interest rates, or maturity structure of interest rates as it is sometimes referred to. The term structure of interest rates refers to the set of theories designed to explain why practically homogeneous bonds of different maturities have different yields. This note illustrates the role that the term structure of interest rates plays in influencing the shape of the yield curve.
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Abstract
Yield curves play a central role in the valuation of financial assets. They are heavily influenced by the term structure of interest rates, or maturity structure of interest rates as it is sometimes referred to. The term structure of interest rates refers to the set of theories designed to explain why practically homogeneous bonds of different maturities have different yields. This note illustrates the role that the term structure of interest rates plays in influencing the shape of the yield curve.