Can somebody please explain me the difference between yield curve and term structure of interest rate?
Thanks
Economics Stack Exchange is a question and answer site for those who study, teach, research and apply economics and econometrics. It only takes a minute to sign up.
Sign up to join this communityAs far as I understand these terms are used almost interchangeably with the former term being more wide while the later applies more specifically to visualization of the term structure.
According to Mishkin and Eakins, Financial Markets and Institutions. 8ed, in chapter 5 pp137 on Term Structure of Interest Rates:
A plot of the yields on bonds with differing terms to maturity but the same risk, liquidity, and tax considerations is called a yield curve, and it describes the term structure of interest rates...
Also the whole chapter on term structure of interest rates focuses almost solely just on the yield curve.
However, as I understand it, the term structure of interest rates can be also applied also more widely, while yield curve specifically refers to the above mentioned plot. However, since the yield curve is almost always used to visualize the relationship the terms are colloquially often used as synonyms.