Yield Curve Analysis: Choosing the optimal maturity date of investments and financing
AbstractThe shape of the yield curve determines the relationship between interest rate risk and return of investments. The analysis of the yield curve can help the investor or financier decide whether to take a short- or long term bond or loan. The management decision of choosing an optimal maturity depends on three form-giving factors of the yield curve: the general level of interest rates, the slope and the curvature of the curve. By using implicit forward rates the decision situation of investors and financiers is modeled and general decision rules for financial managers are derived.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 27781.
Date of creation: 30 Dec 2010
Date of revision:
yield curve; term structure of interest rates; implicit forward rates; expectation theory; optimal maturity of investments;
Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- G3 - Financial Economics - - Corporate Finance and Governance
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-16 (All new papers)
- NEP-FMK-2011-01-16 (Financial Markets)
- NEP-MAC-2011-01-16 (Macroeconomics)
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