An Investigation Into The Linkages Between Euro And Sterling Swap Spreads
This paper examines the causal relationship between euro and sterling swap spreads during the period January, 1999 to March, 2003. The absence of any correlation between changes in the two swap spreads would indicate that credit risk factors are country-specific. But euro swap spreads showed some correlation with the interest rate differentials between the two markets. Both spreads follow a GARCH process but sterling swap spreads reacted more intensely to market movements and were more volatile than their euro counterparts. There was evidence of mild volatility transmission from the sterling swap spreads to the euro swap spreads but the causality was one sided.
|Date of creation:||Jan 2005|
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- Jun Liu & Francis A. Longstaff & Ravit E. Mandell, 2002.
"The Market Price of Credit Risk: An Empirical Analysis of Interest Rate Swap Spreads,"
NBER Working Papers
8990, National Bureau of Economic Research, Inc.
- Liu, Jun & Longstaff, Francis A. & Mandell, Ravit E., 2000. "The Market Price of Credit Risk: An Empirical Analysis of Interest Rate Swap Spreads," University of California at Los Angeles, Anderson Graduate School of Management qt0zw4f9w6, Anderson Graduate School of Management, UCLA.
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