Abstract
This paper tries to empirically investigate whether macroeconomic risk may be statistically useful in explaining long-term volatility of interest rate swap (IRS) in korean market. This paper uses the component-jump model to estimate long-term volatility of IRS from 1/2/2003 to 1/31/2013.
By using the component-jump model, the IRS volatility is decomposed into a long-term and a short-term component. According to this study, slope of yield curve and foreign exchange volatility as a proxy of macroeconomic risk have been significant in explaining long-term volatility of IRS.
Keywords
Citation
Yoon, B.-J., Chang, K.-H. and 민구, 홍. (2013), "Long Term Volatility of Interest Rate Swap and Macroeconomic Risk in Korean Market", Journal of Derivatives and Quantitative Studies: 선물연구, Vol. 21 No. 3, pp. 255-273. https://doi.org/10.1108/JDQS-03-2013-B0001
Publisher
:Emerald Publishing Limited
Copyright © 2013 Emerald Publishing Limited
License
This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode