The Term Structure and Interest Rate Dynamics

Free CFA Level II lesson in Fixed Income. 13 min read, ~1,934 words.

Swap rate curve preferred over the government curve: supply-independent, institutionally liquid, and the relevant credit benchmark for corporate pricing. Forward rate identity: (1 + z(long))^long = (1 + z(short))^short x (1 + f)^gap; every path must produce the same terminal wealth. Riding the yield curve captures rolldown return, but only...