regression - What is a strict definition of U-shaped relationship? - Cross Validated
A humped yield curve is a relatively rare type of yield curve that results when the Retirement · Mortgage · Insurance · Small Business · Wealth Management Humped yield curves are also known as bell-shaped curves. The short end of the yield curve based on short-term interest rates is determined by. A U-shape means convexity (for an application along these lines, see Van . "U- shaped relationship" is not a mathematically precise term and (or that the jump at the discontinuity has some physical meaning). . Company. Visually, a normal distribution is bell or hump shaped and is symmetrical around this deviation, the area under the curve of the normal distribution is always unity. deviation and these values define the shape or kurtosis of the distribution .
The yield curve may also be flat or hump-shaped, due to anticipated interest rates being steady, or short-term volatility outweighing long-term volatility.
Yield curves continually move all the time that the markets are open, reflecting the market's reaction to news. A further " stylized fact " is that yield curves tend to move in parallel i. Types of yield curve[ edit ] There is no single yield curve describing the cost of money for everybody. The most important factor in determining a yield curve is the currency in which the securities are denominated. The economic position of the countries and companies using each currency is a primary factor in determining the yield curve.
Different institutions borrow money at different rates, depending on their creditworthiness. The yield curves corresponding to the bonds issued by governments in their own currency are called the government bond yield curve government curve.
These yield curves are typically a little higher than government curves. They are the most important and widely used in the financial markets, and are known variously as the LIBOR curve or the swap curve. The construction of the swap curve is described below. These are constructed from the yields of bonds issued by corporations. Since corporations have less creditworthiness than most governments and most large banks, these yields are typically higher.
Corporate yield curves are often quoted in terms of a "credit spread" over the relevant swap curve.
Yield Curve - Definition, Diagrams, Types of Yield Curves
Normal yield curve[ edit ] U. Treasury yield curves for different dates. The July yield curve red line, top is inverted. From the post- Great Depression era to the present, the yield curve has usually been "normal" meaning that yields rise as maturity lengthens i.
This positive slope reflects investor expectations for the economy to grow in the future and, importantly, for this growth to be associated with a greater expectation that inflation will rise in the future rather than fall. This expectation of higher inflation leads to expectations that the central bank will tighten monetary policy by raising short-term interest rates in the future to slow economic growth and dampen inflationary pressure.
It also creates a need for a risk premium associated with the uncertainty about the future rate of inflation and the risk this poses to the future value of cash flows. Investors price these risks into the yield curve by demanding higher yields for maturities further into the future. In a positively sloped yield curve, lenders profit from the passage of time since yields decrease as bonds get closer to maturity as yield decreases, price increases ; this is known as rolldown and is a significant component of profit in fixed-income investing i.
Through much of the 19th century and early 20th century the US economy experienced trend growth with persistent deflationnot inflation. During this period the yield curve was typically inverted, reflecting the fact that deflation made current cash flows less valuable than future cash flows. During this period of persistent deflation, a 'normal' yield curve was negatively sloped. Steep yield curve[ edit ] Historically, the year Treasury bond yield has averaged approximately two percentage points above that of three-month Treasury bills.
In situations when this gap increases e. This type of curve can be seen at the beginning of an economic expansion or after the end of a recession. Here, economic stagnation will have depressed short-term interest rates; however, rates begin to rise once the demand for capital is re-established by growing economic activity.
In Januarythe gap between yields on two-year Treasury notes and year notes widened to 2. Flat or humped yield curve[ edit ] A flat yield curve is observed when all maturities have similar yields, whereas a humped curve results when short-term and long-term yields are equal and medium-term yields are higher than those of the short-term and long-term. A flat curve sends signals of uncertainty in the economy. Examples of BRM lifecycles include: A large-scale grow and sustain cycle, characterized by one-to-many and many-to-one relationships.
Activities in this cycle are more or less continuous and overlapping, such as marketingcustomer product support or maintenance, or online community.
These have indeterminate outcomes. A small-scale micro engagement cycle, characterized by one-to-one, discrete or transactional relationships. These have discrete cycles and negotiated outcomes.
BRM principles[ edit ] Measurement and analysis The goals of BRM require that its concepts and principles be identifiable and measurable.
Given the model, a person should be able to identify the business relationships that they are engaged in, and measure them in terms like quantity or duration. The same holds for any aspect of BRM, such as type, role, or principle. Purpose Every business relationship has a purpose that requires the participation of multiple roles to accomplish. The purpose of a given business relationship is discrete and quantifiable. Reputation and trust The BRM model should attempt to model and quantify reputation and trust.
Every relationship, and every interaction within it, contributes to reputation. Reputation mitigates risk and reduces friction within business processes.
Yield curve - Wikipedia
Concern for reputation incentivizes good behavior. Absence of trust will cause a business relationship to fail. Trust increases efficiency and enables conflict resolution. The relationship between trust as a traditional core concept  and in its emerging 'radical' form as a component of online community  must be described. Governance The BRM model needs to account for and align with models of corporate governanceincluding business ethicslegal constraints, and social norms as they apply to business relationships.
Boundaries The BRM model should define the boundaries of business relationships within the larger continuum of interpersonal relationships.