Determinants of interest rate swap spreads

Article Abstract:

Research was conducted to examine the hypothesis that an interest rate swap, as a non-redundant security, creates surplus which will be shared by swap counterparties to compensate their risks in swaps. The time series impacts of the changes of risks of swap counter-parties on swap spreads were analyzed. Results indicate that swap spreads contain a procyclical element and are less cyclical than lower credit rating bond spreads, and that similar results hold if the business cycle factor is controlled.

Derivatives (Financial instruments)

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Optimal consumption and investment strategies with stochastic interest rates

Article Abstract:

A solution characterized for the power utility investor in the dynamic market with changes in interest rates. The numerical experiments reveal that hedge portfolios are less sensitive to the changing interest rates than to the term structure.

Denmark, Science & research, Influence, Bond transfer, Bond trading

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An empirical test of agency cost reduction using interest rate swaps

Article Abstract:

Wall's hypothesis of agency cost reduction using interest rate swaps is tested.

Models

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