Commodities, Derivatives and Structured Products

Yield Curves (2023)


This eCourse consists of two modules on yield curve. A yield curve (or term structure) compares bond yields with their maturities – yields move upward and downward as maturities increase. However, the heterogeneous nature of various interest rate sensitive instruments complicates simple comparisons. Differing yield curves are used to describe differing instruments.
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.


On completion of this course, you will be able to:
- Recognise how a yield curve shows the term structure of interest rates
- List the different yield curve shapes and variants
- Recall the major theories underlying interest rate term structures
- Recognise 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
- Recognise the challenges involved in calculating interpolated values


Module 1: Yield Curves - An Introduction
Topic 1: Overview of Yield Curves
Topic 2: Yield Curve Shape
Topic 3: Benchmark Yield Curves
Topic 4: Yield Curve Shifts
Topic 5: Inverted Yield Curves
Topic 6: Theories Regarding Yield Curve Shape

Module 2: Yield Curves - Construction
Topic 1: Yield Curve Construction Overview
Topic 2: Yield Curve Construction Process
Topic 3: Zero-Coupon Yield Curve Construction
Topic 4: Par Yield Curve Construction
Topic 5: Yield Curve Interpolation


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:1.50, PWMA:1.50
All Member: HK$485
Staff of Corporate Member: HK$485
Non-Member: HK$735