Market Structure and Swap Spreads: International Evidence

Posted: 4 Nov 1999

Date Written: August 1999


This paper contains both a theoretical and empirical analysis of the components of interest rate swap spreads defined as the difference between the fixed swap rate and the riskfree rate of equal maturity. The components are determined by expected LIBOR spreads, default risk, and market structure. A model of the swap market incorporating debt market imperfections and corporate financing choices is used to generate empirical predictions about the relationship between swap market structure and swap spreads. The paper then provides empirical evidence on the cross-sectional and time-series variation of swap spreads in eight international markets. The evidence is consistent with the suggested components and in particular with the market structure component across both markets and swap maturities.

JEL Classification: E43, G12, G13, G15

Suggested Citation

Fehle, Frank Rudolf, Market Structure and Swap Spreads: International Evidence (August 1999). Available at SSRN:

Frank Rudolf Fehle (Contact Author)

BlueCrest Capital ( email )

40 Grosvenor Place
London, SW1X 7AW
United Kingdom

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