Low-frequency volatility of yen interest rate swap market in relation to macroeconomic risk Azad, A. S. M. Sohel, Fang, Victor and Wickramanayake, J. 2011, Low-frequency volatility of yen interest rate swap market in relation to macroeconomic risk, International review of finance, vol. 11, no. 3, pp. 353-390, doi: 10.1111/j.1468-2443.2011.01129.x. Attached Files Name Description MIMEType Size Downloads Title Low-frequency volatility of yen interest rate swap market in relation to macroeconomic risk Author(s) Azad, A. S. M. Sohel orcid.org/0000-0002-8853-7157 Fang, Victor orcid.org/0000-0001-8914-3363 Wickramanayake, J. Journal name International review of finance Volume number 11 Issue number 3 Start page 353 End page 390 Total pages 38 Publisher Wiley - Blackwell Publishing Asia Place of publication Richmond, Vic. Publication date 2011-09 ISSN 1369-412X 1468-2443 Keyword(s) volatility (finance) interest rates capital market macroeconomics value at risk price indexes economic structure foreign exchange Summary Using ‘low-frequency’ volatility extracted from aggregate volatility shocks in interest rate swap (hereafter, IRS) market, this paper investigates whether Japanese yen IRS volatility can be explained by macroeconomic risks. The analysis suggests that this low-frequency yen IRS volatility has strong and positive association with most of the macroeconomic risk proxies (e.g., volatility of consumer price index, industrial production volatility, foreign exchange volatility, slope of the term structure and money supply) with the exception of the unemployment rate, which is negatively related to IRS volatility. This finding is fairly consistent with the argument that the greater the macroeconomic risk the greater is the use of derivative instruments to hedge or speculate. The relationship between the macroeconomic risks and IRS volatility varies slightly across the different swap maturities but is robust to alternative volatility specifications. This linkage between swap market and macroeconomy has practical implications since market makers and hedgers use the swap rate as benchmark for pricing long-term interest rates, corporate bonds and various other securities. Language eng DOI 10.1111/j.1468-2443.2011.01129.x Field of Research 149999 Economics not elsewhere classified Socio Economic Objective 970114 Expanding Knowledge in Economics HERDC Research category C1.1 Refereed article in a scholarly journal Copyright notice ©2011, Wiley-Blackwell Publishing Asia Persistent URL http://hdl.handle.net/10536/DRO/DU:30042538 Document type: Journal Article Collections: Faculty of Business and Law School of Accounting, Economics and Finance 2018 ERA Submission Related Links Link Description Connect to published version (restricted access) Go to link with your DU access privileges     Unless expressly stated otherwise, the copyright for items in DRO is owned by the author, with all rights reserved. Versions Version Filter Type Tue, 21 Feb 2012, 10:22:00 EST Tue, 15 May 2012, 09:14:10 EST Tue, 15 May 2012, 09:21:09 EST Thu, 05 Sep 2013, 10:01:10 EST Thu, 05 Sep 2013, 10:02:52 EST Fri, 13 Jun 2014, 12:58:25 EST Thu, 11 Dec 2014, 17:38:55 EST Filtered Full Citation counts:   Cited 11 times in TR Web of Science Cited 12 times in Scopus Search Google Scholar Access Statistics: 791 Abstract Views, 12 File Downloads  -  Detailed Statistics Created: Tue, 21 Feb 2012, 10:22:00 EST