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Determinants of the Swap Spreads in Poland

Piotr Ryszard Pluciennik ()
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Piotr Ryszard Pluciennik: Adam Mickiewicz University

Acta Universitatis Nicolai Copernici, Ekonomia, 2014, vol. 45, issue 1, 115-132

Abstract: Swap spreads – the spreads between the fixed rate of IRS and the yield of treasury bonds with the same maturity are very useful measure of liquidity and credit premium in the interbank market. Furthermore, they do not have the main flaw of LIBOR-OIS spread, which is that. very seldom banks lend money for the period longer than 1 month. Therefore, it is impossible to determine how the LIBOR reflects the true cost of money in the interbank market. In the article we give answer to the question if the swap spreads reflect the market situation; and we determine the factors which mainly determine the swap spread. The analysis was based on ARFIMA-GARCH model with additional explanatory variables and VARFI-BEKK model.

Keywords: swap spreads; liquidity premium; credit risk; VAR model; fractionally integrated models; BEKK model; impulse response function (search for similar items in EconPapers)
JEL-codes: C14 E52 (search for similar items in EconPapers)
Date: 2014
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