ECON 251: Financial Theory
Lecture 09 - Yield Curve Arbitrage. Where can you find the market rates of interest (or equivalently the zero coupon bond prices) for every maturity? This lecture shows how to infer them from the prices of Treasury bonds of every maturity, first using the method of replication, and again using the principle of duality. Treasury bond prices, or at least Treasury bond yields, are published every day in major newspapers. From the zero coupon bond prices one can immediately infer the forward interest rates. Under certain conditions these forward rates can tell us a lot about how traders think the prices of Treasury bonds will evolve in the future. (from oyc.yale.edu)
| Lecture 09 - Yield Curve Arbitrage |
| Time | Lecture Chapters |
| [00:00:00] | 1. Defining Yield |
| [00:09:07] | 2. Assessing Market Interest Rate from Treasury Bonds |
| [00:35:46] | 3. Zero Coupon Bonds and the Principle of Duality |
| [00:50:31] | 4. Forward Interest Rate |
| [01:10:05] | 5. Calculating Prices in the Future and Conclusion |
| References |
| Lecture 9 - Yield Curve Arbitrage Instructor: Professor John Geanakoplos. Transcript [html]. Audio [mp3]. Download Video [mov]. |
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