• Is the route that market prices followed or are expected to follow.
| ||Embedded terms in definition|
| ||Market prices|
| ||Referenced Terms|
| ||Preferred habitat theory: A biased expectations theory that believes the term structure reflects the expectation of the future Path of interest rates as well as risk premium. However, the theory rejects the assertion that the risk premium must rise uniformly with maturity. Instead, to the extent that the demand for and supply of funds does not match for a given maturity range, some participants will shift to maturities showing the opposite imbalances. As long as such investors are compensated by an appropriate risk premium whose magnitude will reflect the extent of aversion to either price or reinvestment risk.|
| ||Scenarios: Are hypothetical outcomes or Path dependent behavior for trading, hedging or analytical purposes.|
| ||Related Terms|
| ||Path dependent|
Path dependent option
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