Determinants of New Taiwan Dollar Interest Rate Swap Spreads

• Main Authors: Meng-Shiuan Lee, 李孟軒
• Other Authors: Yang-Cheng Lu
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/35549101111857356881

碩士 === 銘傳大學 === 財務金融學系碩士班 === 98 === This paper examines the determinants of interest rate swap spreads. Prior studies found that the term structure of interest rates, credit risks, and liquidity risks have impact on the determinants of swap spreads. As suggested by previous research, the term structure of interest rates can be fitted by Nelson and Siegel model [Journal of Business 60 (1987) 476]. Specifically, Nelson and Siegel (1987) indicated that the term structure of interest rate can be interpreted as level, slope, and curvature. While previous research has examined the determinants of swap spreads, the empirical results are unclear. Furthermore, to the best of our knowledge, no work has been done on the determinants of swap spreads using emerging swap markets. Hence, this paper attempts to fill the gap. Using level, slope, curvature, credit risk, and liquidity risk factors as the explanatory variables, this paper find that the credit risk factor plays a more important role than liquidity risk factor. Moreover, the level and curvature factors are important determinants of the swap rates for the short-term maturity swap rates and the slope factor is an important determinant of swap rates for the long-term maturity swap rates. Finally, for the robustness check, this paper also uses threshold model to examine this issue. The empirical results of the threshold results are consistent with OLS results.