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Yield Curve Analysis: Choosing the optimal maturity date of investments and financing

Rainer Lenz

MPRA Paper from University Library of Munich, Germany

Abstract: The 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.

Keywords: yield curve; term structure of interest rates, implicit forward rates, expectation theory, optimal maturity of investments (search for similar items in EconPapers)
JEL-codes: E43 G3 G31 G32 (search for similar items in EconPapers)
Date: 2010-12-30
New Economics Papers: this item is included in nep-fmk and nep-mac
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