INTEREST-RATE-VOLATILITY-THE-YIELD-CURVE-AND-BOND-PRICING

Start by looking at the Government of Canada bonds, specifically, their yield to maturity (YTM) metric. First, graph YTM curve. Observe shape of the yield curve; see how it changes through time. Pay attention to 3 different type of curve movements – level (e.g. 10-year note YTM changes), slope (e.g. spread between 10Y and 2Y bonds, curvature (e.g. butterfly made up of 2y, 10y and 30y bonds) Once you get that base intuition, try to apply PCA. See if you can normalize PCA components into level effect, slope and curve. Once it is done, progress to ML framework. Inputs should be YTMs again.