Determinants of UK swap spreads

C.N. Ho, A.P. Marshall

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

The main factors which drive swap spreads are interest rates, credit risks and liquidity risks. The study uses UK data from 1 January 2001 to 30 June 2004 to analyse the components of interest rate swap spreads. This paper updates previous empirical evidence and considers if different economic and market conditions can have an impact on determinants of swap spreads. It is found that the level and slope of interest rates are significantly positively related to UK swap spreads for most maturities. This differs from previous empirical evidence. It is concluded that differing economic and market conditions can have an impact on swap spreads. Consistent with previous evidence a positive relation between the default risk factor and swap spreads is also found and the liquidity premium is positively related to UK swap spreads for medium- and long-term swap spreads.
Original languageEnglish
Pages (from-to)305-309
Number of pages4
JournalApplied Financial Economic Letters
Volume2
Issue number5
DOIs
Publication statusPublished - Sep 2006

Fingerprint

Swap spread
Interest rates
Market conditions
Empirical evidence
Economic conditions
Maturity
Factors
Liquidity premium
Interest rate swaps
Default risk
Risk factors
Liquidity risk
Credit risk

Keywords

  • macroeconomics
  • finance
  • interest rates
  • economy

Cite this

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Determinants of UK swap spreads. / Ho, C.N.; Marshall, A.P.

In: Applied Financial Economic Letters, Vol. 2, No. 5, 09.2006, p. 305-309.

Research output: Contribution to journalArticle

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