USD Interest Rate Swaption Strategies During the Unconventional Monetary Policy and Pandemic Eras

Hiroaki Shirokawa, Kohei Yamaguchi, Takahiro Obata and Ryuta Sakemoto

Journal of Futures Markets, 2025, vol. 45, issue 3, 208-223

Abstract: This study investigates the performance of USD interest rate swaption straddle strategies during the unconventional monetary policy and pandemic eras. We construct long–short portfolio swaption straddles using longer tenors and maturities than those in the previous literature. Moreover, we propose an equally weighted strategy that takes risk exposures to both volatility and jump risks. This strategy generates a higher Sharpe ratio than the delta–gamma neutral strategy during the unconventional monetary policy period. This result is weakly associated with spot swap forward rate jumps and robust, including transaction costs. We also observe that adopting longer maturity swaptions in the long position leads to higher values of risk and returns.

Date: 2025
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/fut.22561

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:45:y:2025:i:3:p:208-223

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().