THEDETERMINATESOFINTERESTRATES(金融市场学上.pptVIP

Yields on money market instruments Prime rate Federal Funds Rate 3-month Treasury Discount rate 第二十七页，共五十页。 Yields on capital market instruments Moody’s corporate Baa Conventional home mortgage Moody’s corporate Aaa 30-yr Treasury constant maturity Municipal bond 第二十八页，共五十页。 Why do interest rates differ between securities? The difference in yields between various debt instruments is termed the structure of interest rates. Rates among securities differ for different: Terms to maturity Default risk Marketability and liquidity Special features such as convertibility, and call and put features. Income tax effects 第二十九页，共五十页。 Term to final maturity In general, the longer the maturity, the greater are these risks. Yield Curve…a diagram that compares the market yields on securities that differ only in terms of maturity. The general relationship is also referred to as the term structure of interest rates. 第三十页，共五十页。 Most recent yield curves 第三十一页，共五十页。 General shape of yield curves 第三十二页，共五十页。 Theories of the term structure of interest rates There are three common theories of the term structure of interest rates: the pure expectations theory (PET), the liquidity premium theory, and the market segmentation theory. 第三十三页，共五十页。 Unbiased expectations theory…Attributes the relationship between yields on different maturity securities entirely to difference in expectations of future interest rates. Long-term interest rates are an average of current and expected short-term interest rates. The expected short-term interest rate is the markets unbiased forecast of future interest rates. 第三十四页，共五十页。 Liquidity premium theory…extends the unbiased expectations theory by incorporating investor expectations of price risk in establishing market rates. The unbiased expectations theory assumes that securities that differ only in terms of maturity are perfect substitutes. If the expected return on a series of short-term secu