What does parallel & Non-Parallel shift in Yield Curve mean exactly ?
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Imagine a yield curve.
When there is an equal change in the yield curve across the time it’s called as parallel shift in the yield & with this assumption only we calculate the duration of a bond, which gives % change in the price of a bond for 1% parallel shift in the yield curve. However this is too harsh an assumption Because in real life parallel shift doens’t happen generally.
Non parallel shift means the new yield curve won’t change equally across the time & can take any shape & for this KRD is used.
Hope it helps.