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Lesson 8 of 17

Parallel and Non-parallel Shifts in Yield Curve

Parallel Shift

Rates across the maturity spectrum change by a constant amount and the slope of the yield curve remains consistent.

Non-Parallel Shifts

  • Twist: The slope of the yield curve becomes flatter (the spread between short and long term yields narrows) or steeper (the spread between short and long term yields widens).

  • Butterfly: Change to the curvature of the yield curve.

    Positive butterfly: The yield curve goes loses some of its "hump" and becomes straighter.

    Negative butterfly: The yield curve takes on more of a hump and ceases to look similar to a straight line.

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Three Shapes of the Yield Curve

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Factors Driving Treasury Investment Returns and Bond Price Risk

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Fixed Income Part 1

17 lessons

Lessons

1
CFA Level 2: Fixed Income Part 1 – Introduction
2
Principles of Credit Analysis
3
High Yield Corporate Debt (aka Junk bonds)
4
Analyzing Credit of Asset Backed Securities
5
Analyzing Credit of Municipal Bonds
6
Sovereign Debt
7
Three Shapes of the Yield Curve
8
Parallel and Non-parallel Shifts in Yield Curve
9
Factors Driving Treasury Investment Returns and Bond Price Risk
10
Yield Curve Construction with Treasuries
11
LIBOR Swap Rate Curve
12
Theories of the Term Structure of Interest Rates
13
Key Rate Duration
14
How to Calculate Interest Rate Volatility?
15
Benchmark Yield Spreads
16
Valuing an Option Embedded Bond using Binomial Interest Rate Tree
17
How to Price Convertible Bonds?
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