RT Journal Article
SR Electronic
T1 Ripple Effects, the Long-Run Relationship, and Dynamic Corrections among Interest Rate Swap Spreads
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 40
OP 52
DO 10.3905/jfi.2018.1.060
VO 27
IS 4
A1 Kenneth A. Tah
A1 Geoffrey Ngene
YR 2018
UL https://pm-research.com/content/27/4/40.abstract
AB This study tests the ripple effects, long-run convergence, and dynamic correlation structures of swap spreads of varying maturities. The authors employ the ARDL bounds-testing approach and the asymmetric DCC methodology on daily data spanning 15 years. The results largely support the presence of the ripple effect and the long-run convergence of swap spreads of differing maturities. However, there are significant variations in the strength and speed of adjustment towards the long-run equilibrium relationship among diverse maturities. Most pairs of swap spreads exhibit strong, symmetric, highly persistent, and time-varying dynamic co-movements, suggesting interdependence and information flow among the swap spreads of varied maturities.TOPICS: Fixed income and structured finance, statistical methods, interest-rate and currency swaps