Theories of Interest Rate Term Structures

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1. Context

In this swatch, we take a look at three proposed theories of why interest rates have term structures i.e. they are not flat or constant. These also help to gain insights into why term structures are upward or downward sloping. The details of the reading in which this topic appears are given below:

AreaFinancial Markets and Products
ReadingInterest Rates
ReferenceJohn Hull, Options, Futures, and Other Derivatives, 9th Edition (New York: Pearson, 2014). Chapter 4. Interest Rates.

2. Theories of Term Structure