#finance #yield-curve
The usual representation of the yield curve is a function P, defined on all future times t, such that P(t) represents the value today of receiving one unit of currency t years in the future.
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Open itThe usual representation of the yield curve is a function P, defined on all future times t, such that P(t) represents the value today of receiving one unit of currency t years in the future. If P is defined for all future t then we can easily recover the yield (i.e. the annualized interest rate) for borrowing money for that period of time via the formula
The significant difOriginal toplevel document
Yield curve - Wikipedia, the free encyclopedia00Swap2y6.01253Swap3y6.10823Swap4y6.16Swap5y6.22Swap7y6.32Swap10y6.42Swap15y6.56Swap20y6.56Swap30y6.56
A list of standard instruments used to build a money market yield curve.
The data is for lending in US dollar, taken from October 6, 1997
<span>The usual representation of the yield curve is a function P, defined on all future times t, such that P(t) represents the value today of receiving one unit of currency t years in the future. If P is defined for all future t then we can easily recover the yield (i.e. the annualized interest rate) for borrowing money for that period of time via the formula
The significant difficulty in defining a yield curve therefore is to determine the function P(t). P is called the discount factor function.
Yield curves are built from either prices available in the bond market or the money market. Whilst the yield curves built from the bond market use prices only from a specific class of boSummary
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