An empirical analysis of factors driving the swap spread

Working paper no 54, 2008

Authors Asgharian, Hossein; Karlsson, Sonnie
Subject Publications
Type Working paper
Year 2008
Published 23 June 2008
In this paper, we perform a robust analysis of the determinants of US swap spreads using a wide range of theoretically motivated candidate factors. We conduct an analysis in the frequency domain to see how the impacts of the candidate factors on the swap spread differ between different horizons. The sensitivity of the parameters to all possible model specifications has been investigated. Among other things, we find that Treasury- and stock market volatility as well as the activity of the Mortgage Backed Security holders have strong impacts on the US swap spread.