Advanced

An Empirical Analysis of Factors Driving the Swap Spread

Asgharian, Hossein LU and Carlsson, Sonnie LU (2008) In Journal of Fixed Income 18. p.41-56
Abstract
In this article, we perform a robust analysis of the determinants of U.S. swap spreads using a wide range of theoretically motivated candidate factors. We conduct an analysis by taking into consideration the interdependence between the candidate factors, as well as the time frequency under which the factors affect the spread. We find that the suggested variables can to a fair degree explain movements in the swap spread. The results suggest that the mortgage-backed security holders' demand for swap rates strongly influences the U.S. swap spread. Importantly, our analysis of the interdependence between the explanatory variables indicates that the underlying initiator of these activities is changes in the shape of the yield curve. Among other... (More)
In this article, we perform a robust analysis of the determinants of U.S. swap spreads using a wide range of theoretically motivated candidate factors. We conduct an analysis by taking into consideration the interdependence between the candidate factors, as well as the time frequency under which the factors affect the spread. We find that the suggested variables can to a fair degree explain movements in the swap spread. The results suggest that the mortgage-backed security holders' demand for swap rates strongly influences the U.S. swap spread. Importantly, our analysis of the interdependence between the explanatory variables indicates that the underlying initiator of these activities is changes in the shape of the yield curve. Among other things, we find that Treasury and stock market volatility as well as the activity of the mortgage-backed security holders have strong effects on the U.S. swap spread. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
Journal of Fixed Income
volume
18
pages
41 - 56
publisher
institutional investor journal
external identifiers
  • scopus:54849419508
ISSN
1059-8596
DOI
10.3905/jfi.2008.712349
language
English
LU publication?
yes
id
60e7a780-41ff-428a-a885-c30cb7e0e99c (old id 1388440)
date added to LUP
2009-04-20 12:27:30
date last changed
2017-01-01 05:42:16
@article{60e7a780-41ff-428a-a885-c30cb7e0e99c,
  abstract     = {In this article, we perform a robust analysis of the determinants of U.S. swap spreads using a wide range of theoretically motivated candidate factors. We conduct an analysis by taking into consideration the interdependence between the candidate factors, as well as the time frequency under which the factors affect the spread. We find that the suggested variables can to a fair degree explain movements in the swap spread. The results suggest that the mortgage-backed security holders' demand for swap rates strongly influences the U.S. swap spread. Importantly, our analysis of the interdependence between the explanatory variables indicates that the underlying initiator of these activities is changes in the shape of the yield curve. Among other things, we find that Treasury and stock market volatility as well as the activity of the mortgage-backed security holders have strong effects on the U.S. swap spread.},
  author       = {Asgharian, Hossein and Carlsson, Sonnie},
  issn         = {1059-8596},
  language     = {eng},
  pages        = {41--56},
  publisher    = {institutional investor journal},
  series       = {Journal of Fixed Income},
  title        = {An Empirical Analysis of Factors Driving the Swap Spread},
  url          = {http://dx.doi.org/10.3905/jfi.2008.712349},
  volume       = {18},
  year         = {2008},
}