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Benchmark tipping and the role of the swap market in price discovery

✍ Scribed by Russell Poskitt

Publisher: John Wiley and Sons
Year: 2007
Tongue: English
Weight: 314 KB
Volume: 27
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.20282

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✦ Synopsis

Abstract

The author uses a high‐frequency data set to investigate the roles of the sterling swap and futures markets in price discovery at the short‐end of the sterling yield curve. Information flows between the futures and swap markets are found to be largely contemporaneous. Causal information flows are bidirectional, although the futures market dominates the information flow over the very short term. Thus, the futures market remains the primary locus of price discovery despite the increased use of swaps as a pricing benchmark and hedging instrument in recent years. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:981–1001, 2007

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