Interest-rate data

The object zcb contains daily values of Canadian zero-coupon-bond yields, expressed as percentages, for the period 2006-2015. Yields are the key risk-factor when it comes to analysing the interest-rate risk in a portfolio of bonds or other fixed-income products.

It is not so clear what is the best way of calculating risk-factor changes for yields. It is possible to compute log-returns, provided yields are not negative, and it is also possible to calculate simple returns. To compute the simple returns of a series, use only diff() instead of diff() and log().

In this exercise, you will explore the contents of zcb, plot time series of yields for fixed times to maturity, and plot risk-factor changes for these yields. You will also plot the whole yield curve on particular dates. The zcb data has been loaded into your workspace.

Instructions

Use names() to identify the columns in zcb that correspond with the maturity times of 1 year, 5 year, and 10 year yields. Assign these column names to a vector yield_cols.
Compute the log-returns of zcb as zcb_x and plot them for the maturities in yield_cols.
Compute simple returns of zcb as zcb_x2 and plot them for the maturities in yield_cols.
Define a vector of maturities as maturity. This has already been done for you.
Index zcb in plot() to plot the yield curve for the first day in zcb.
Index zcb in lines() to add a line to the yield curve for the last day in zcb.

Take Hint (-30xp)