
Yield Curves  2 Days
The term “yield curves” are often bandied about but usually only those who work with them understand what they are and how they are used. In a number of countries there is an “official” yield curve off which everyone works. In South Africa, the Bond Exchange is attempting to institute a similar policy, but without much success. Each bank has its own proprietary curve – thereby resulting in pricing and valuation differences.
Topics to be covered include:
 What is a yield curve – a very brief description of the make up of a yield curve.
 Types of yield curves – par curves v zero coupons v forward/forwards
 Yield curve shapes and a bit about the various yield curve theories.
 All of the above serve as an introduction to the real nitty gritty.
 How to construct a yield curve – here I can show how to construct either a zero coupon yield curve or a forward/ forward curve, which is a bit mathematical but we don’t need to go into too much detail.
 How to use yield curves in the valuation process.
 Duration and convexity and how they impact upon the valuation of assets when rates move – once again a bit mathematical but of extreme importance in explaining how valuations change over time as well as due to changes in rates
 Some yield curve “plays” – covering jargon such as straddles etc

