Risk Premia in the Term Structure of Swaps in Pesetas

Alfonso Novales and Pilar Abad

Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: Some characteristics of the term structure in interest rate swap (IRS) markets are influenced by the own idiosyncrasy of this financial instrument, which could explain the rejection of the Expectations Hypothesis, we present evidence supporting the existence of significant, time-varying risk premia. We then focus on characterizing some propreties of realized, ex-pst term-premia, and provide explanatory variables for them. We pay particular attention to the extent to which the levels of markets risk, default risk and liquidity risk explain the time evolution of risk premia at different maturities.

Keywords: Term structure; Interest rate swaps; Expectations theory; Forwad rate; Risk premium. (search for similar items in EconPapers)
Pages: pages 22
Date: 2002
New Economics Papers: this item is included in nep-rmg
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