- CFA Exams
- 2023 Level II
- Topic 6. Fixed Income
- Learning Module 28. The Term Structure and Interest Rate Dynamics
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Learning Outcome Statements PDF Download
|1. The Forward Rate Model|
describe relationships among spot rates, forward rates, yield to maturity, expected and realized returns on bonds, and the shape of the yield curve;
describe how zero-coupon rates (spot rates) may be obtained from the par curve by bootstrapping;
|2. Yield Curve Movement, Forward Curve and Rolling Down the Yield Curve|
describe the assumptions concerning the evolution of spot rates in relation to forward rates implicit in active bond portfolio management;
describe the strategy of rolling down the yield curve;
|3. The Swap Rate Curve and the Swap Spread|
explain the swap rate curve and why and how market participants use it in valuation;
calculate and interpret the swap spread for a given maturity;
describe short-term interest rate spreads used to gauge economy-wide credit risk and liquidity risk;
|4. Traditional Theories of the Term Structure of Interest Rates|
explain traditional theories of the term structure of interest rates and describe the implications of each theory for forward rates and the shape of the yield curve;
|5. Yield Curve Factor Models|
explain how a bond's exposure to each of the factors driving the yield curve can be measured and how these exposures can be used to manage yield curve risks;
explain the maturity structure of yield volatilities and their effect on price volatility.
|6. Developing Interest Rate Views Using Macroeconomic Variables|
k. explain how key economic factors are used to establish a view on benchmark rates, spreads, and yield curve changes.
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