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| Tekijä: | Gupta, A. Subrahmanyam, M. G. |
| Otsikko: | An empirical examination of the convexity bias in the pricing of interest rate swaps |
| Lehti: | Journal of Financial Economics
2000 : FEB, VOL. 55:2, p. 239-279 |
| Asiasana: | Currency Interest rates Markets Swaps |
| Vapaa asiasana: | Futures |
| Kieli: | eng |
| Tiivistelmä: | This paper examines the convexity bias, caused by the non-linearity of payoffs, in the pricing of interest rate swaps off the Eurocurrency futures curve. The evidence from 4 major currencies (U.S. dollar USD, U.K. Pound GBP, German DM DEM and Japanese Yen) during 1987-1996 suggests that swaps were initially being priced off the futures curve. Subsequently, the market swap rates drifted below the rates implied by futures prices. |
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