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Journal Article
Interest rate structure and the credit risk of swaps
Swap contracts have grown tremendously in the last decade. Most are interest-rate swaps, the simplest being an exchange of one partys fixed-rate interest payments for anothers floating-rate payments. Swaps can lower borrowing costs for both parties as well as provide a tool for managing interest-rate risk. As the market for swaps grows and matures, understanding and measuring the accompanying credit risk remains a concern of bankers, regulators, and corporate users ; The credit risk of swaps arises when one party defaults and interest rates have changed in such a way that the other party can arrange a new swap only on inferior terms. It involves only the cash flows exchanged by the counterparties, and not the underlying notional principal. Previous work has used simulations of the future course of interest rates to analyze swaps credit risk. This study adds the interest rate forecast implicit in the yield curve to the randomly generated interest-rate scenario used in the simulations. The author shows that credit exposure is greater for longer maturities and when future rates are expected to be higher, and that the risk rises and then falls over the life of the swap.
AUTHORS: Simons, Katerina
DATE: 1993

Journal Article
Interest rate swaps: use, risk, and prices
AUTHORS: Felgran, Steven D.
DATE: 1987

Journal Article
Beyond plain vanilla: a taxonomy of swaps
AUTHORS: Abken, Peter A.
DATE: 1991

Journal Article
F.Y.I. going off the balance sheet
AUTHORS: Johnson, Sylvester; Murphy, Amelia A.
DATE: 1987

Journal Article
Derivative securities use grows as banks strive to hedge risks
AUTHORS: anonymous
DATE: 1999

Journal Article
Swaps growing in importance as financial risk management tools
AUTHORS: anonymous
DATE: 1991

Journal Article
Did you know? A primer on credit default swaps
A credit default swap, an over-the-counter financial contract that allows for the transfer of credit risk from one party to another, is one way financial institutions mitigate and diversify credit risk.
AUTHORS: anonymous
DATE: 2008

Journal Article
Interest rate swaps: a review of the issues
AUTHORS: Wall, Larry D.; Pringle, John J.
DATE: 1988

Journal Article
Credit default swaps and their market function
Credit derivative instruments allow default risk to be segregated from debt of all kinds. They have granted investors the ability to hedge their portfolios and provided numerous institutions with a new source of income. However, the market for credit default swaps is neither transparent nor regulated, perhaps undermining the stability of the financial system it has helped innovate.
AUTHORS: Craig, Ben R.; Cherny, Kent
DATE: 2009

Journal Article
Swaps and the swaps yield curve
Interest rate swaps have become a popular financial derivative, and market watchers and economists are paying closer attention to them and their associated yield curves. This Commentary gives a brief introduction to swaps and their relation to other interest rates.
AUTHORS: Haubrich, Joseph G.
DATE: 2001

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