Forwardkäyrät

Forwardkäyrät is a term of Finnish origin that translates to "forward curves" or "forward rate curves" in English. It refers to a graphical representation of the implied future short-term interest rates. These curves are not predictions of future rates but rather reflect the market's current expectations for rates at various points in the future.

The forward rate curve is derived from the spot rate curve, which represents the yields on zero-coupon bonds for different maturities. Specifically, the forward rate for a future period is calculated using the relationship between the spot rates of the period's start and end. For example, a one-year forward rate starting one year from now can be calculated using the yield on a two-year zero-coupon bond and the yield on a one-year zero-coupon bond.

Forwardkäyrät are crucial tools in finance for several purposes. They are used in pricing fixed-income securities, managing interest rate risk, and making investment decisions. For instance, a lender might use the forward curve to determine the appropriate interest rate for a loan that will originate in the future. Similarly, investors use these curves to assess the attractiveness of different investment strategies and to hedge against potential interest rate movements. The shape of the forward curve, whether upward sloping, downward sloping, or flat, provides insights into the market's outlook on future economic conditions and monetary policy. An upward sloping curve generally suggests expectations of rising interest rates, while a downward sloping curve implies expectations of falling rates.