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L2 46 Term Structure and Volatility of Interest Rates > b describe factors that drive U.S. Treasury security returns, and evaluate the importance of each factor; > Flashcards

b describe factors that drive U.S. Treasury security returns, and evaluate the importance of each factor; Flashcards

L2 46 Term Structure and Volatility of Interest Rates (7 decks)

a explain parallel and nonparallel shifts in the yield curve;

b describe factors that drive U.S. Treasury security returns, and evaluate the importance of each factor;

c explain various universes of Treasury securities that are used to construct the theoretical spot rate curve, and evaluate their advantages and disadvantages;

d explain the swap rate curve (LIBOR curve) and why market participants have used the swap rate curve rather than a government bond yield curve as a benchmark;

e explain the pure expectations, liquidity, and preferred habitat theories of the term structure of interest rates and the implications of each for the shape of the yield curve;

f calculate and interpret the yield curve risk of a security or a portfolio by using key rate duration;

g calculate and interpret yield volatility, distinguish between historical yield volatility and implied yield volatility, and explain how to forecast yield volatility.

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