An Analytic Solution for Interest Rate Swap Spreads

What Is An Interest Rate Swap Anyway?

An investment officer at a community bank recently told me that he kept hearing and reading about “swap spreads” and “the swaps curve” and really didn’t know exactly what those things were. He was right to ask since a great deal of financial analysis these days relies on the swaps market as a source of information about expectations for interest rates, credit risk and bond market behavior. I wa...

Modelling Australian interest rate swap spreads by mixture autoregressive conditional heteroscedastic processes

An interest rate swap is a contract between two parties to exchange periodically fixed rate payments for floating rate payments based on an agreed-upon notional principal and maturity. The fixed rate is known as the swap rate and a swap curve can be constructed using swap rates of different maturities. The swap curve is widely used by financial market participants as the benchmark for the prici...

An Empirical Analysis of US Interest Rate Swap Spreads during the Sovereign Crisis of the Euro Zone

This paper analyzes US interest rate swap spreads in relation to the sovereign crisis of the Euro zone. The results reveal that swap spreads of 5and 10-years incorporate default risk positively in accordance with the theory. According to Ito (2010) which analyzed the period of global financial crisis stemming from subprime loan problem in the US, the default risk is negatively incorporated in t...

Credit contingent interest rate swap pricing

*Correspondence: [email protected] 1RBC Financial Group, 222 Bay St, M5K 1G8, Toronto, ON, Canada 2Department of Mathematics and Statistics, York University, 4700 Keele Street, M3J 1P3 Toronto, ON , Canada Full list of author information is available at the end of the article Abstract Credit value adjustment (CVA) is an adjustment to an existing trading price based on the counterparty-ri...

An Analytic Solution for a Vasicek Interest Rate Convertible Bond Model