Expectation Theories of Yield Term Structures

Pure expectations says the long spot rates predict future spot rates (i.e., the forward rate is an unbiased predictor of future spot rates). "Liquidity Preference" adds a RISK PREMIUM: investors in longer maturities demand compensation for maturity risk (e.g., uncertainty, greater duration/interest rate risk). "Preferred habitat" adds the technical factor of supply/demand.

Category:

Education

Tags:

• Expectation
• Theory
• of
• interest
• rate
• term
• structure
• federal
• reserve
• treasury
• yield
• curve

[DeadLyQatar]

I'm not an expert, but shouldn't nominal = real - inflation?

[bionicturtledotcom]

@DeadLyQatar I don't *think* so (although nominal is sometimes used in different ways). I had in mind (eg) if inflation is 2% and the nominal yield is 5%, then the real yield is 3%. So, real = nominal - inflation

[leolohk23]

it would be better to have substitute for a non native english speaker like me. :(

[PlanetSunny6]

Fantastic. This video accelerated my learning.

Very good presentation with graph and diagram. Thanks bionicturtle.

[thecomputergurukid]

Why would longer maturity mean less liquidity?

[zang777788797998]

thanks man,

These video's bring clarity to my studies. Keep up the good work

[DeadLyQatar]

you're right, my bad