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| Author: | Levis, M. Suchar, V. |
| Title: | Capital adequacy guidelines and interest rate swaps |
| Journal: | Omega
1994 : SEP, VOL. 22:5, p. 415-426 |
| Index terms: | ARBITRAGE PRICING THEORY HEDGING FORWARD EXCHANGE |
| Language: | eng |
| Abstract: | The paper investigates the empirical implications of the capital adequacy guidelines on interest rate swaps. First , it provides stylized estimates of the likely rates of return on equity that can be achieved on iterest rate swap transactions under different assumptions of intermediation fees, risk weights and swap maturities. Second, using data of daily swap spreads we explore the potential profitability of various trading strategies in interest rate swap interbank market. Implications for swap intermediaries and corporate users are discussed. |
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