August 2008
Beginner
852 pages
46h 4m
English
Content preview from Handbook of Finance: Financial Markets and InstrumentsBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.
Chapter 46. The Determinants of the Swap Spread and Understanding the LIBOR Term Premium
MOORAD CHOUDHRY, PhD
Head of Treasury, KBC Financial Products, London
Abstract: The use of interest rate swaps to manage and hedge interest rate risk exposure is widespread. The rate payable on a swap is a positive spread above the sovereign benchmark rate, reflecting interbank quality credit risk. The magnitude of this spread is dependent on various factors, including prevailing macro-level political and economic circumstances, supply and demand, the shape and level of the yield curve, and market volatility. Market practitioners analyze these factors and anticipate changes in the spread, as the extent of the spread feeds into hedge costs. Funding and hedging costs also reflect overall term premium rates. The level of the term premium in the short-term yield curve is a function of the current shape of the curve and market expectations of interest rate levels in the future.
Keywords: futures curve, interest rate swap, LIBOR curves, LIBOR spread, swap spread, term premium
An important hedging tool in bank asset-liability management (ALM) operations is the interest rate swap, a derivative instrument. In this chapter, we consider an important issue for interest rate analysis, the swap spread. Specifically, we look at the spread of the swap curve over the government bond yield curve; this subject is important because the swap spread is an indicator of value and risk premium in the market, as well as ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Read now
Unlock full access
More than 5,000 organizations count on O’Reilly
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.Julian F.
I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.Addison B.
I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.Amir M.
I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.