I have a hard time remembering all theories of the yield curve (liquidity preference, pure expectation theor, liquidity preference theory, unbiased vs. biased, etc)
If anyone has an effective method of remembering them for the exam, that would be much appreciated!
Example, I understand the following for liquidity preference
1) Liquidity Preference
- Suggests that a downward-sloping term structure of interest rates is due to declining expected ST rates, and although there is a maturity premium to consider, it is NOT large enough to offset the expected declie in ST rates.