113分析金融市场与金融机构 第五章.ppt

Slide 5-31 Slide 5-32 ) 1 )( 1 ( 2 2 t t i i ? ? ) 1 )( 1 ( 1 e t t i i ? ? ? ? Since ( i 2 t )2 is extremely small, it ( iet +1) is also extremely small, 2 1 2 e t t t i i i ? ? ? Slide 5-33 More generally for n -period bond: In words: Interest rate on long bond = average of short rates expected to occur over life of long bond n i i i i i n t t t t nt 1 2 1 ... ? ? ? ? ? ? ? ? ? Slide 5-34 In general, any long-term interest rate can be expressed by the following: where; i nt = market rate on an n-period security at time t, i t = market rate on a 1-period security at time t, I t+1 = 1-period forward rate on a security to be delivered one year from the present (t + 1), I t+2 = 1-period forward rate on a security to be delivered two years from the present (t + 2), I t+n-1 = 1-period forward rate on a security to be delivered one period before maturity (t + n - 1) ) 1 ( ) 1 )( 1 ( ) 1 ( 1 1 ? ? ? ? ? ? ? ? n t t t n nt i i i i ? Slide 5-35 Pure Expectations Theory and Term Structure Facts Explains why yield curve has different slopes: 1. When short rates expected to rise in future, average of future short rates = i nt is above today's short rate: therefore yield curve is upward sloping 2. 2. When short rates expected to stay same in future, average of future short rates same as today's, and yield curve is flat 3. 3. Only when short rates expected to fall will yield curve be downward sloping Slide 5-36 Pure Expectations Theory and Term Structure Facts Pure Expectations Theory explains Fact 1 that short and long rates move together 1. Short rate rises are persistent 2. If i t ? today, i e t +1 , i e t +2 etc. ? ? average of future rates ? ? i nt ? 3.Therefore: i t ? ? i nt ? , i.e., short and long rates move together Slide 5-37 Pure Expectations Theory and Term Structure Facts Explains Fact 2 that yield curves tend to have steep slope when s