Actual factors to determine cross-currency basis swaps: An empirical study on US dollar/Japanese yen basis swap rates from the late 1990s

Shinada, Naoki (2005): Actual factors to determine cross-currency basis swaps: An empirical study on US dollar/Japanese yen basis swap rates from the late 1990s.

Abstract

Cross-currency basis swap rates that exchange US-dollar (USD) and Japanese-yen (JPY) LIBORs have fluctuated since the late 1990s. It is increasingly important for market participants to figure out such swap rates, but there have not been many empirical studies about actual markets. This study addresses factors of USD/JPY swap rates from the late 1990s to the present, and demonstrates that differences in credit risk premiums, forward exchange rates and assets swaps of foreign investors from JPY to other currencies have significant effects on those rates.

• Item Type: MPRA Paper
• Language: English
• Keywords: Currency swap; international finance; empirical finance
• Subjects: G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

References

Bank of England (2004), "Markets and Operations," Quarterly Bulletin, Bank of England, Vol. 44-2.

Flavell, R. (2002), Swaps and Other Derivatives, New York: John Wiley and Sons Inc.

Nishioka, S. and N. Baba (2004), "Negative Interest Rates under the Quantitative Monetary Easing Policy in Japan: The Mechanism of Negative Yen Funding Costs in the FX Swap Market," Working Paper 04-E-8, Financial Markets Department, Bank of Japan.