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| Author: | Feldhütter, P. Lando, D. |
| Title: | Decomposing swap spreads |
| Journal: | Journal of Financial Economics
2008 : MAY, VOL. 88:2, p. 375-405 |
| Index terms: | bond markets swaps credit risk liquidity models |
| Freeterms: | term structure |
| Language: | eng |
| Abstract: | In this study, a six-factor model for Treasury bonds, corporate bonds, and swap rates is analyzed. Swap spreads are decomposed into three components: a convenience yield from holding Treasuries, a credit risk element from the underlying LIBOR rate, and a factor specific to the swap market. ... The model also reveals the relation btw. AA hazard rates and the spread btw. LIBOR rates and General collateral repo rates and on the level of the riskless rate compared to swap and Treasury rates. |
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