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Yield Curve

Yield Curve
Definition: The graphic depiction of the relationship between the yield on bonds of the same credit quality but different maturities. Related: Term structure of interest rates. Harvey (1991) finds that the inversions of the yield curve (short-term rates greater than long term rates) have preceded the last five US recessions. The yield curve can accurately forecast the turning points of the business cycle.
Yield Curve
Definition: A chart showing the relationship between yields and maturity's for a set of similar instruments or bank deposits. The creation of this chart is a complicated process which can have a large impact on the pricing of options and interest rate derivatives. This process is demonstrated in a yield curve applet. In essence, the yield curve shows the markets' expectations of future interest rates.