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Determinants of UK swap spreads

Ho, C.N. and Marshall, A.P. (2006) Determinants of UK swap spreads. Applied Financial Economic Letters, 2 (5). pp. 305-309. ISSN 1744-6546

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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.

Item type: Article
ID code: 5542
Keywords: macroeconomics, finance, interest rates, economy, Commerce
Subjects: Social Sciences > Commerce
Department: Strathclyde Business School > Accounting and Finance
Related URLs:
    Depositing user: Strathprints Administrator
    Date Deposited: 03 Mar 2008
    Last modified: 12 Mar 2012 10:43
    URI: http://strathprints.strath.ac.uk/id/eprint/5542

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