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Determinants of Swap Spreads in a Developing Financial Market: Evidence from Finland

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  • Antti Suhonen

Abstract

This paper presents empirical evidence on the determinants of swap spreads in Finland using four years of data. Spreads exhibit a significant negative relationship with the amount of fixed rate deposits with banks, which reflects the importance of banks in the Finnish capital markets. Spreads are positively linked to business cycle and market risk factors such as the slope of the yield curve and the volatility of interest rates. The influence of hedging costs has become increasingly important over time, especially in longer dated swaps. A relationship is also observed between swap spreads and the external value of the currency.

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  • Antti Suhonen, 1998. "Determinants of Swap Spreads in a Developing Financial Market: Evidence from Finland," European Financial Management, European Financial Management Association, vol. 4(3), pages 379-399, November.
    • Handle: RePEc:bla:eufman:v:4:y:1998:i:3:p:379-399
    DOI: 10.1111/1468-036X.00072
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    Cited by:

    1. Piotr Płuciennik, 2012. "The Impact of the World Financial Crisis on the Polish Interbank Market: A Swap Spread Approach," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 4(4), pages 269-288, December.
    2. Azad, A.S.M. Sohel & Fang, Victor & Hung, Chi-Hsiou, 2012. "Linking the interest rate swap markets to the macroeconomic risk: The UK and us evidence," International Review of Financial Analysis, Elsevier, vol. 22(C), pages 38-47.

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