This paper models the month-over-month change in euro-denominated (EUR) long-term interest rate swap yields. It shows that the change in the short-term interest rate has an economically and statistically significant effect on the change in EUR swap yields of different maturity tenors in the...

This paper examines the transition from LIBOR to SOFR in the US and maps out the consequences for European corporate treasurers by showing how the application of SOFR in cash products and derivatives differs from LIBOR. As interest rate and cross-currency swaps transition to compounded SOFR,...

As life expectancy increases, pension plans face growing longevity risk. Standardized longevity-linked securities such as survivor contracts allow pension plans to transfer this risk to capital markets. However, more consensus is needed on the appropriate mortality model and premium principle to...

We study the implications of deviations from covered interest rate parity for international capital flows using novel data covering euro-area derivatives and securities holdings. Consistent with a dynamic model of currency risk hedging, we document that investors' holdings of USD bonds decrease...

The effects of stochastic volatility, jump clustering, and regime switching are considered when pricing variance swaps. This study established a two-stage procedure that simplifies the derivation by first isolating the regime switching from other stochastic sources. Based on this, a novel...

This paper studies market liquidity in interest rate swaps (IRS) before and during the global tightening of monetary policy. IRS constitute the single largest derivatives segment globally. Banks and Pension Funds extensively rely on IRS to hedge interest rate risk. Hence, providing an...

This paper analyzes the dynamics of Canadian dollar-denominated (CAD) interest rate swap yields. It applies autoregressive distributive lag (ARDL) models, using monthly time series data, to estimate the effects of the current short-term interest rate and other relevant macro-financial variables...

We propose a new model to decompose inflation swaps into genuine inflation expectations and risk premiums. We develop a no-arbitrage term structure model with stochastic endpoints, separating macroeconomic variables into transitory parts and long-run, economically grounded determinants, such as...

We build a novel term structure model for pricing synthetic euro area core inflation-linked swaps, a hypothetical swap contract indexed to core inflation. Our approach relies on a term structure model of traded headline inflation-linked swap rates, which we assume span core inflation. The model...

This paper econometrically models the dynamics of Indian rupee (INR) swap yields based on key macroeconomic factors using the autoregressive distributive lag (ARDL) approach. It examines whether the short-term interest rate has a decisive influence on long-term INR swap yields after controlling...

We build a novel term structure model for pricing synthetic euro area core inflation-linked swaps, a hypothetical swap contract indexed to core inflation. Our approach relies on a term structure model of traded headline inflation-linked swap rates, which we assume span core inflation. The model...

This article measures the degree of potential de-anchoring of inflation expectations in the euro area vis-à-vis the inflation objective of the European Central Bank (ECB). A no-arbitrage term structure model that allows for a time-varying long-term mean of inflation expectations, π୲ ∗, is...

According to the efficient-market hypothesis, forecasts derived from efficient market prices should be unbeatable. However, numerous institutions, including the European Central Bank, regularly publish forecasts for future inflation that deviate from market expectations. We investigate the...

The expansion of bilateral swap arrangements (BSAs) since the Global Financial Crisis has led to a substantial reconfiguration of the Global Financial Safety Net (GFSN). This paper examines the drivers of BSA supply using a novel dataset on all publicly documented BSAs. It finds that countries...

The main focus of this paper is a comprehensive overview of the US$ reference rate reform, with a particular focus on its implications for USD interest rate swaps (IRS). This paper aims to shed light on the current situation and future developments in a changing financial landscape. This paper...

This paper examines the dynamics of euro-denominated (EUR) long-term interest rate swap yields. It shows that the short-term interest rate has an economically and statistically significant effect on EUR swap yields of different maturity tenors, after controlling for various key macroeconomic...

The aim of this note is to help stakeholders optimize their decision-making on when, where, and how to use debt-for-development swaps ("debt swaps"), ensuring they bring the intended benefits to all parties involved. It also proposes new approaches to structure these mechanisms, making them less...

This article measures the degree of potential de-anchoring of inflation expectations in the euro area vis-à-vis the inflation objective of the European Central Bank (ECB). A no-arbitrage term structure model that allows for a time-varying long-term mean of inflation expectations, π∗ t , is...

A capped volatility swap is a forward contract on an asset’s capped, annualized, realized volatility, over a predetermined period of time. This paper presents data-driven machine learning techniques for pricing such capped volatility swaps, using unique data sets comprising both the strike...

The ISDA designed fallback for cash-settled swaptions with collateral discounting generates swap rate and term structure dependent exotics. To analyse precisely the fallback impact a full term structure of rates and volatility modelling is required. A recent paper Bang and Daboussi (2022)...

This article discusses the problem of pricing discretely sampled variance swaps under the Heston stochastic volatility model with stochastic interest rate and stochastic dividend yield. In particular, our modelling framework consists of a stochastic interest rate driven by Hull-White (HW) or...

Considering the fair strike values of variance and volatility swaps, we use a stochastic volatility model in which the log volatility is given by a fractional Ornstein-Uhlenbeck process with two versions; a stationary version and a version with a deterministic initial value. Under these...

In this article, we test performance persistence and measure the historical, the implied volatility, the credit spread volatility and the value at risk,VaR, of the credit derivatives swaptions contracts. We examine contracts of US leveraged loans, mortgage backed securities, high grade corporate...

The political economy literature shows that monetary hegemony guarantees significant privileges to a country's economy — governments gain greater flexibility in their budgetary and current accounts without incurring significant macroeconomic imbalances. Such greater economic policy flexibility...

We ask whether banks use interest rate swaps to hedge the interest rate risk of their assets, primarily loans and securities. To this end, we use regulatory data on individual swap positions for the largest 250 U.S. banks. We find that the average bank has a large notional amount of $434...