What Drives Interest Rate Swap Spreads? An Empirical Analysis of Structural Changes and Implications for Modeling the Dynamics of the Swap Term Structure

Abstract

Existing models of the term structure of interest rate swap yields assume a unique regime for the data generating process and ascribe variations in swap-Treasury yield spread to default risk or to liquidity premium. However, the interest rate swap market has been marked by economic events and institutional changes that might have significant effects on the… (More)

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