Links among Interest Rate Swap Markets

Volatility spillovers across international swap markets: The US, Japan, and the UK

“…Both tests support the unit root hypotheses at the 5% significance level for all data series. Hence, the VAR-EGARCH swap models were conducted using first differences (see In et al, 2003In et al, , 2004. To conserve space, we do not present results, but complete results of the unit root tests are available from the author on request.…”

“…However, the use of weekly data can be a potential weakness of the study. In et al (2003In et al ( , 2004 argue that due to recent advances in telecommunication and computer technologies, international influences can be rapidly transmitted from one swap market to another, and hence the more frequently the data are observed, the more reliable will be the estimated effects.…”

“…Examples of recent literature include Fehle (2000), Eom et al (2001Eom et al ( , 2002, Milas (2001, 2004), and In et al (2003In et al ( , 2004. Fehle (2000) investigates the impact that US swap spreads have on British, German, French, Japanese, Spanish, and Dutch swap markets, whereas Eom et al (2002) examine the relationship between Japanese yen and US dollar interest rate swap spreads, using weekly data.…”

“…Lekkos and Milas (2004), using a nonlinear VAR approach, find evidence in support of the existence of common risk factors in the US and the UK interest rate swap markets. In the analysis of the links between interest rate swap markets in the US, the UK, and Japan, In et al (2003) report that across all swap maturities and in all three currencies, the slope of the risk-free term structure makes the greatest contribution, and the contribution is greater for longer term to maturity.…”

International Transmission of Swap Market Movements: The U.S., Korea, and China*

“…Notably, interest rate swaps have marked a dramatic growth during the last decade and are now considered as the most popular derivative contracts used by US firms. 1) Examples of swap market literature include Fehle (2000), Eom et al (2001Eom et al ( , 2002, Milas (2001, 2004), In et al (2003In et al ( , 2004, and In (2007). Also, Eom et al (2002) investigated linkages between the interest rate swap spreads of the Japanese yen and U.S. dollar.…”