International transmission of swap market movements: The U.S., Korea, and China

Hahn S. Lee, Woo Hyung Hong

Research output: Contribution to journalArticlepeer-review

7 Scopus citations

Abstract

This paper investigates whether and to what extent the Korean and Chinese swap markets are linked to the US counterpart. We apply bivariate EGARCH models to daily closing mid-rate data on swap maturities of 3, 5, and 10 years for the US, Korea, and China. We find that the US swap market has a major influence on the Korean and the Chinese swap markets. Strong evidence is found for the swap spread as well as volatility spillover effects from the US swap market to the Korean counterpart. On the other hand, the linkage between the US and Chinese swap markets turns out to be weak. This result indicates that the Chinese swap market, which opened on April 2006, is yet premature.

Original languageEnglish
Pages (from-to)723-744
Number of pages22
JournalAsia-Pacific Journal of Financial Studies
Volume38
Issue number5
DOIs
StatePublished - Oct 2009

Keywords

  • Bivariate EGARCH
  • International linkage
  • Swap market
  • Swap spreads
  • Volatility spillovers

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