Fixed Income - Change in level and steepness

P

Peter13

New member
Joined
Jun 18, 2026
Messages
0
Reaction score
0
If we get an equal shift (100bp) in steepness and level of the yield curve, what does this do to the yield curve, and what is it defined as? Does it affect the curvature? I understand effective duration is a parallel shift, yet if the steepness changes this is not considered a parallel shift, and to get key rate duration it should be for a key rate?
 
This is a general question I am asking nothing to do with anything
 
Not sure if I understand the question.
How is it possible to have a level shift and a steepness shift at the same time?
I might be wrong, but my understanding is that a level change is effectively a parallel shift of the yield curve and affects the rates for all maturities. (Effective Duration)
Steepness impacts specific maturities. (Key Rate Duration)
 
@mhdave Exactly, this is what confuses me in some cases I have seen both happen at the same time and did not know what the outcome is.. You are correct in your understanding though. But when both happen at the same time it is neither I believe.. But again im not entirely sure
 
But according to the curriculum you could have a combination of 2 happen at the same time
 
Interesting. Let me look up situation when both happen at the same time. Can you point me to the section in the curriculum where you see this happening at the same time.
 
Example 11 of Fixed Income in Reading 43, Question 2 or 3 I believe has Level and Steepness happen at the same time. I have also seen some practice problems with both happening at the same time
 
Got it! I know what u r asking now.
I believe we need to specify the bps shift for both the lower maturities as well as the longer maturities to identify how much the slope of the yield curve will get impacted.
A 100bps move over the entire range of maturities will just be a parallel shift.
 
mhdave wrote:
Got it! I know what u r asking now.
I believe we need to specify the bps shift for both the lower maturities as well as the longer maturities to identify how much the slope of the yield curve will get impacted.
A 100bps move over the entire range of maturities will just be a parallel shift.
Click to expand...
Makes sense now, thanks!
 
mhdave wrote:
Got it! I know what u r asking now.
I believe we need to specify the bps shift for both the lower maturities as well as the longer maturities to identify how much the slope of the yield curve will get impacted.
A 100bps move over the entire range of maturities will just be a parallel shift.
Click to expand...
ok, i need to quit AF until the result came out, for the sake of my sanity.. lol
 
You must log in or register to reply here.
Back
Top