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Swap Curve Dynamics in Hong Kong: An Interpretation

Author

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  • Salih N. Neftci

    (City University of New York)

Abstract

This paper investigates the linkage between the USD and HKD swap curves. We argue that these curves contain important information, which is over and above that provided by the sovereign yield curves and the standard measures of market liquidity, Libor-type interest rates. Our work indicates that using sovereign yield curves and concentrating only on the risk premia associated with the breakdown of the currency peg is not sufficient for policy making in Hong Kong. Swap spreads and swap curves should be carefully monitored to evaluate economy wide risks and to conduct macroeconomic policy.

Suggested Citation

  • Salih N. Neftci, 2004. "Swap Curve Dynamics in Hong Kong: An Interpretation," Working Papers 062004, Hong Kong Institute for Monetary Research.
    • Handle: RePEc:hkm:wpaper:062004
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    References listed on IDEAS

    as
    1. Farshid Jamshidian, 1997. "LIBOR and swap market models and measures (*)," Finance and Stochastics, Springer, vol. 1(4), pages 293-330.
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    More about this item

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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