21.   The forward yield curve is a plot of forward rates against term to maturity.

22.   The annuity yield curve is a plot of annuity yields against term to maturity.

23.   The rolling yield curve is a plot of rolling yields against term to maturity.

24.   In this section, we consider some theories underlying the yield curve or the term structure of interest rates.

25.   A falling yield curve is explained by investors expecting short-term rates to be lower in the future.

26.   A humped yield curve is explained by investors expecting short-term interest rates to rise and long-term rates to fall.

27.   When the inflation rate is expected to remain constant over time, the normal position of the yield curve is to be upward-sloping.

28.   The expectations hypothesis by itself is insufficient to explain this, since under constant inflationary expectations, the expectations hypothesis predicts a flat yield curve.

29.   A rising yield curve can be explained by liquidity preference theory.

30.   A humped yield curve is explained by the combination of a descending yield curve plus an upward-sloping liquidity preference curve.