The role of the term structure of interest rates in interpreting the yield curve's forms : theoretical analysis

Abstract EN

The purpose of this study is to identify the relationship between bond interest rates and their maturity, known as the term structure of interest rates or the yield curve.

within this context, we have looked at the most important theories that explain the structure, direction and graphic explanation of this relationship, while identifying the strengths and disadvantages of each theory based on three important facts.

the study found that each theory had a certain degree of interpretation of the facts to which it was touched upon, the expectation theory was able to explain only the first and second facts, market segmentation theory explained the third fact that the expectation theory couldn't explain, and the liquidity preference theory was able to explain all three facts.