Demand-and-supply imbalance risk and long-term swap spreads

• 成果类型: Article
• 署名作者: Hanson, Samuel G.; Malkhozov, Aytek; Venter, Gyuri
• 署名单位: Harvard University; University of London; Queen Mary University London; University of Warwick
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2024.103814
• 发表日期: 2024
• 关键词: Swap spreads; Limits to arbitrage; Intermediary capital; constraints

摘要

We develop and test a model in which swap spreads are determined by end users' demand for and constrained intermediaries' supply of long-term interest rate swaps. Swap spreads reflect compensation both for using scarce intermediary capital and for bearing convergence risk-i.e., the risk spreads will widen due to a future demandand -supply imbalance. We show that a proxy for the intermediated quantity of swaps-dealers' net position in Treasuries-flipped sign during the Global Financial Crisis when swap spreads turned negative and that this variable predicts the excess returns on swap spread trades. Exploiting our model's sign restrictions, we identify shifts in demand and supply and find that both contribute significantly to the volatility of swap spreads.