ECON 252: Financial Markets
Lecture 10 - Debt Markets: Term Structure. The markets for debt, both public and private far exceed the entire stock market in value and importance. The U.S. Treasury issues debt of various maturities through auctions,
which are open only to authorized buyers. Corporations issue debt with investment banks as intermediaries. The interest rates are not set by the Treasury, the corporations or the investment bankers, but are determined by the market,
reflecting economic forces about which there are a number of theories. The real and nominal rates and the coupons of a bond determine its price in the market. The term structure, which is the plot of yield-to-maturity against
time-to-maturity indicates the value of time for points in the future. Forward rates are the future spot rates that can be calculated using today's bond prices. Finally, indexed bonds, which are indexed to inflation, offer the safest asset of
all and their price reveals a fundamental economic indicator, the real interest rate.
(from oyc.yale.edu)
| Lecture 10 - Debt Markets: Term Structure |
| Time | Lecture Chapters |
| [00:00:00] | 1. Introduction |
| [00:04:25] | 2. The Discount and Investment Rates |
| [00:19:12] | 3. The Bid-Ask Spread and Murdoch's Wall Street Journal |
| [00:29:17] | 4. Defining Bonds and the Pricing Formula |
| [00:39:38] | 5. Derivation of the Term Structure of Interest Rates |
| [00:52:34] | 6. Lord John Hicks's Forward Rates: Derivation and Calculations |
| [01:06:09] | 7. Inflation and Interest Rates |
| References |
| Lecture 10 - Debt Markets: Term Structure Instructor: Professor Robert J. Shiller. Resources: Lecture 10 [PDF]. Transcript [html]. Audio [mp3]. Download Video [mov]. |
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