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DC Field | Value | Language |
---|---|---|
dc.contributor.author | Lekkos, I | - |
dc.contributor.author | Milas, C | - |
dc.coverage.spatial | 36 | en |
dc.date.accessioned | 2007-06-26T20:51:22Z | - |
dc.date.available | 2007-06-26T20:51:22Z | - |
dc.date.issued | 2002 | - |
dc.identifier.citation | Economics and Finance Working papers, Brunel University, 02-05 | en |
dc.identifier.uri | http://bura.brunel.ac.uk/handle/2438/923 | - |
dc.description.abstract | This paper produces evidence in support of the existence of common risk factors in the US and UK interest rate swap markets. Using a multivariate smooth transition autoregression (STVAR) framework, we show that the dynamics of the US and UK swap spreads are best described by a regime-switching model. We identify the existence of two distinct regimes in US and UK swap spreads; one characterized by a "flat" term structure of US interest rates and the other characterized by an "upward" slopping US term structure. In addition, we show that there exist significant asymmetries on the impact of the common risk factors on the US and UK swap spreads. Shocks to UK oriented risk factors have a strong effect on the US swap markets during the "flat" slope regime but a very limited effect otherwise. On the other hand, US risk factors have a significant impact on the UK swap markets in both regimes. Despite their added flexibility, the STVAR models do not consistently produce superior forecasts compared to less sophisticated autoregressive (AR) and vector autoregressive (VAR) models. | en |
dc.format.extent | 410979 bytes | - |
dc.format.mimetype | application/pdf | - |
dc.language.iso | en | - |
dc.publisher | Brunel University | en |
dc.subject | Interest rate swaps, swap spreads, term structure of interest rates, regime switching, | en |
dc.subject | smooth transition models. | en |
dc.title | Common risk factors in the US and UK interest swap markets-evidence from a non-linear vector autoregression approach | en |
dc.type | Research Paper | en |
Appears in Collections: | Dept of Economics and Finance Research Papers |
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