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What determines the yen swap spread?

Azad,ASMS, Batten,JA and Fang,V 2015, What determines the yen swap spread?, International Review of Financial Analysis, vol. 40, pp. 1-13, doi: 10.1016/j.irfa.2015.04.001.

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Title What determines the yen swap spread?
Author(s) Azad,ASMSORCID iD for Azad,ASMS orcid.org/0000-0002-8853-7157
Batten,JA
Fang,V
Journal name International Review of Financial Analysis
Volume number 40
Start page 1
End page 13
Publisher Elsevier Inc.
Publication date 2015-07
ISSN 1057-5219
Keyword(s) Business cycles
Correlation risk
Interest rate swaps
Japan
Market skewness
Swap spread puzzle
Systematic risk
TIBOR
Yen swap markets
Summary We investigate if Japanese yen denominated interest rate swap spreads price risks in addition to liquidity and default risk. These additional risks include: the time-varying correlation between interest rates of different types and maturities; business cycle risk; and market skewness risk. Our analysis, over a number of different maturities and sample periods, supports the existence of an additional risk premium. We also show that the time-varying correlation between short term market interest rates (e.g., TIBOR) and the longer term Government bond yield (e.g., Gensaki) is of particular importance. Japanese yen swap spreads are shown to contain both pro-cyclical and counter-cyclical elements of business cycle risk, positive risk premia for skewness risk and variable risk premia for correlation risk (between fixed and floating interest rates).
Language eng
DOI 10.1016/j.irfa.2015.04.001
Field of Research 150202 Financial Econometrics
Socio Economic Objective 910301 International Agreements on Trade
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2015, Elsevier
Persistent URL http://hdl.handle.net/10536/DRO/DU:30073283

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Every reasonable effort has been made to ensure that permission has been obtained for items included in DRO. If you believe that your rights have been infringed by this repository, please contact drosupport@deakin.edu.au.