what is the difference between par rates and spot rates?
A par rate is the YTM of a coupon-paying bond.
A spot rate is the YTM of a zero coupon bond.
Thanks, that’s a piece of cake!
And in the case of an upward slope yield curve, the par rate curve will be below the spot which is below the forward rate.
The reason behind that is that, a par rate will be lower becuase it should worth more as it is paying coupons, while a spot rate curve is bare of coupon. As for the future rate curve, it above them all to bear the risk for future.