New study reveals how interest rate swaps impact market stability
The article investigates how different types of interest rate swaps are affected by market swap rates. The researchers analyzed simple interest rate swaps to understand how they are priced and how they can be used for hedging. They found that the pricing of illiquid interest rate swaps is influenced by the rates of more liquid instruments in the market. This study also identified portfolios that can be used for perfect hedging in the context of interest rate swaps.