Yield-Curve Butterfly
A three-leg curve trade structure: LONG one maturity point (the "belly," typically 5-year) and SHORT two other maturity points (the "wings," typically 2-year and 10-year), DV01-weighted so both parallel shifts AND slope changes produce approximately zero P&L. The trade isolates curve CURVATURE -- profits if the belly outperforms the wings or vice versa, depending on direction. The third dimension of curve positioning beyond level and slope; the natural expression of "the belly is underpriced relative to the wings" or the reverse view.
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Related terms
10Y Treasury · Altman Z-Score · Asset Sensitivity · Basel III · Bond ETF · Bretton Woods
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