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Parallel and Non-parallel Shifts in Yield Curve

CFA® Exam, CFA® Exam Level 2, Fixed Income Securities

This lesson is part 8 of 17 in the course Fixed Income Part 1

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.

Previous Lesson

‹ Three Shapes of the Yield Curve

Next Lesson

Factors Driving Treasury Investment Returns and Bond Price Risk ›

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In this Course

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

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