scholarly journals Centralized Trading, Transparency and Interest Rate Swap Market Liquidity: Evidence from the Implementation of the Dodd-Frank Act

2016 ◽  
Author(s):  
Evangelos Benos ◽  
Richard Payne ◽  
Michalis Vasios
Keyword(s):  
Interest Rate ◽  
Market Liquidity ◽  
Interest Rate Swap ◽  
Rate Swap

scholarly journals Centralized Trading, Transparency, and Interest Rate Swap Market Liquidity: Evidence from the Implementation of the Dodd–Frank Act

2018 ◽  
Vol 55 (1) ◽  
pp. 159-192 ◽  
Author(s):  
Evangelos Benos ◽  
Richard Payne ◽  
Michalis Vasios
Keyword(s):  
Interest Rate ◽  
The United States ◽  
Market Liquidity ◽  
Control Group ◽  
Market Quality ◽  
Transaction Data ◽  
Interest Rate Swap ◽  
Interest Rate Swaps ◽  
Clear Increase ◽  
Rate Swap

We use proprietary transaction data on interest rate swaps to assess the effects of centralized trading, as mandated by Dodd–Frank, on market quality. Contracts with the most extensive centralized trading see liquidity metrics improve by between 12% and 19% relative to those of a control group. This is driven by a clear increase in competition between dealers, particularly in U.S. markets. Additionally, centralized trading has caused interdealer trading in EUR swap markets to migrate from the United States to Europe. This is consistent with swap dealers attempting to avoid being captured by the trade mandate in order to maintain market power.

Yield Curves, Swap Curves, and Term Structure of Interest Rates

2019 ◽  
pp. 203-228
Author(s):  
Tom P. Davis ◽  
Dmitri Mossessian
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Yield Curves ◽  
No Arbitrage ◽  
Interest Rate Swap ◽  
The Interest Rate ◽  
Rate Swap ◽  
The U.S

This chapter discusses multiple definitions of the yield curve and provides a conceptual understanding on the construction of yield curves for several markets. It reviews several definitions of the yield curve and examines the basic principles of the arbitrage-free pricing as they apply to yield curve construction. The chapter also reviews cases in which the no-arbitrage assumption is dropped from the yield curve, and then moves to specifics of the arbitrage-free curve construction for bond and swap markets. The concepts of equilibrium and market curves are introduced. The details of construction of both types of the curve are illustrated with examples from the U.S. Treasury market and the U.S. interest rate swap market. The chapter concludes by examining the major changes to the swap curve construction process caused by the financial crisis of 2007–2008 that made a profound impact on the interest rate swap markets.

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