Volatility spillovers across the swap markets: evidence from US, Australian, and Japanese swap markets

Vivek Bhargava, D.K. Malhotra and George Tsetsekos

International Journal of Bonds and Derivatives, 2016, vol. 2, issue 1, 59-86

Abstract: In this paper, we examine the inter-market relationship of volatility of the swap spreads among three swap markets: US dollar interest rate swaps, Japanese interest rate swaps, and Australian interest rate swaps. Data for swaps with maturities of two-, five-, and ten-years are used and it covers the period of economic crisis that started in 2007. There is evidence of increased volatility of swap spreads during the year 2008. We also find that market integration increases with maturity across the three swap markets. Furthermore, there is volatility spillover from the USA to Japan and from US to Australian swap markets. There is also evidence of spillover from Australian swap market to both US and Japanese swap markets. The spillover from the US and Australian swap markets to Japanese swap markets is asymmetric.

Keywords: currency swaps; volatility spillovers; interest rate swaps; swap markets; USA; United States; Australia; Japan; financial crisis; market integration. (search for similar items in EconPapers)
Date: 2016
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