The Term Structure or Yield Curve

This chapter begins with the introduction to a term structure or yield curve. The term structure can be built on discount factors, as functions of the zero rates, but this way is less used in practice. Yield curves can be built with mid rates - the most usual way - or with borrowing or lending rates. The authors have opted to start with the yield curve - given it is a corner stone in financial mathematics of the markets. In the case of both swap curves and risk-less curves, the building of a yield curve will be different on the short end of the curve from the long end of the curve. The chapter provides an example for yield curve points determination. It concludes with interpolations on a yield curve.