- Yield Curve Factor Model
- Level(方向性改变)，对实际收益率总变动的影响最大
- Steepness(斜率改变):二级主要强调短期和长期利率的改变
- Curvature(曲度改变):短中长期的改变
- Yield Curve Risk Management
- 1)Effective Duration(只考虑了Yield Curve平行移动)
- 2)Key Rate Duration: 有几个关键期限，就有几个KRD;对于完全由零息债券组成的组合来说，KRDi = Di * Wi.
- Term Structure of interest rate volatility: Short-term interest rate volatility is more volatile than long-term interest rate volatility.
- Binomial Interest Rate Tree (Equal Probability + Lognormal)
Construction: Spot Rate-> Forward Rate -> High/Low Rate - MBS:
- interest rate movement -> prepayment movement -> Cash flow, Maturity, Present Value change
- MBS is path-dependent, so should be valued by Monte Carlo Simulation instead of Binomial Tree.
