steepening

The drawback of yield-based duration and convexity is that implicitly they must assume a parallel shift in the rate curve. While there can be many non-parallel shift, the two most common are twists and butterflies. A twist is when the curve steepens or flattens. A STEEPENING is when either (i)...

Learning objectives: Assess the impact of maturity on the price of a bond and the returns generated by bonds. Define the flattening and steepening of rate curves and describe a trade to reflect expectations that a curve will flatten or steepen. Questions: 904.1. Below is a graph of swap rates...