Covered Interest Parity Deviations under the Control of Credit Default Swap Spread and Central Bank Intervention

• 발행기관: 한국자료분석학회
• 저자명: Hong Bae Kim Byeong-Kyun Lim Soon-Young Lim Joo Hun Kang
• 간행물 정보: 『Journal of The Korean Data Analysis Society (JKDAS)』Vol.12 No.4, 1811~1823쪽, 전체 13쪽
• 주제분류: 자연과학 > 통계학
• 파일형태: PDF
• 발행일자: 2010.08.30

영문 초록

This study investigated dislocations in the Korean foreign exchange(FX) swap market and focused on the credit risk of financial institutions, which is reflected in the FX swap price. Both the credit default swap spread of US financial institutions and that of Hana Bank were positively related to the covered interest parity(CIP) deviation observed in the FX swap market before the Lehman failure. However, after the turmoil, FX swap deviations tended to depend more on US financial institutions with investment grade rating than on Korean financial institutions. Our findings suggested that the concern over the counterparty risk and dollar shortages of US financial institutions under crisis was an important driving force behind the deviation from CIP in the FX swap market. Liquidity conditions in the Libor funding markets mattered more to FX swap markets during the turmoil than before the turmoil. However, central bank measures to counter the dollar shortages were effective. Our empirical evidence suggests that the establishment of dollar swap lines became useful in diminishing the level of FX swap market deviation.

목차

1. Introduction

2. Central bank intervention in FX swap market

3. Data

4. Empirical Analysis

5. Concluding Remarks

References

키워드

FX swap Covered interest parity CDS