Commodities, Derivatives and Structured Products

Yield Curves (2018)


This eCourse consists of two modules. Module 1 covers the major forms of yield curve and outlines the key theories that seek to explain how term structures arise.

Module 2 looks at how we generate theoretical spot curves from the observable prices of market instruments. We outline the problems associated with rate interpolation and describe some of the solutions. Finally, we show how Z-spread calculations can use spot curves to assess value.


On completion of this course, you will be able to:
- Recognize how a yield curve shows the term structure of interest rates
- Identify how short rate quotations compare with longer dated ones
- List the different yield curve shapes and variants
- Identify the difference between spot, par, and forward yield curves
- Recognize the major theories underlying interest rate term structures
- Recognize the importance of accurate yield curves in the pricing and valuation of fixed income and derivative instruments
- Identify the key stages involved in yield curve construction
- Determine simple spot and forward yield curves using the bootstrapping methodology
- Recognize the challenges involved in calculating interpolated values
- Calculate a Z-spread by discounting bond cash flows using a spot curve


Module 1: Yield Curves – An Introduction
Topic 1: Overview of Yield Curves
Topic 2: Comparing Short & Longer-Dated Quotations
Topic 3: Yield Curve Types
Topic 4: Yield Curves & Forward Rates
Topic 5: Theories Underlying Interest Rate Term Structures

Module 2: Yield Curves – Construction
Topic 1: Overview of Yield Curves
Topic 2: Constructing the Yield Curve
Topic 3: Convexity
Topic 4: Methods of Interpolation
Topic 5: Z-Spreads


Relevant Subject
Type 1 - Dealing in securities
Type 2 - Dealing in futures contracts
Type 3 - Leveraged foreign exchange trading
Type 4 - Advising on securities
Type 5 - Advising on futures contracts
SFC:2.00, PWMA:2.00
Non-Member: HK$980
Staff of Corporate Member: HK$650
All Member: HK$650