Intermediate hump of a butterfly shift (qbank Q)
Assuming there is a positive butterfly shift in the yield curve, which of the following statements is most accurate?
A) The curvature of the yield curve decreases.
B) The curvature of the yield curve increases.
C) The yield curve becomes less humped at intermediate maturities.
Your answer: A was correct!
A butterfly shift occurs when yields increase (decrease), the yields in the short maturity and long maturity sectors increase more (less) than the yields in the intermediate maturity sector.
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totally see why A is correct, but why is C not correct? as the curvature decreases, the short and long term maturity yields increase more than the intermediate, so the intermediate hump should decrease. on page 174 of schweser book 4 it even says, when describing negative butterfly shifts, “if rates increase, intermediate term yields increase by more than the long and short term maturity yields, as shown in figure 4.” so i’d expect the opposite (a decrease in hump) for a positive butterfly. |
发表于 2013-4-6 21:27
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