Does the use of interest rate swaps matter?

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Luo, Hao
Vijverberg, Chu-Ping C.

Luo, Hao (2010). Does the use of interest rate swaps matter? -- In Proceedings: 6th Annual Symposium: Graduate Research and Scholarly Projects. Wichita, KS: Wichita State University, p. 47-48


This project analyzes the effectiveness of employing interest rate swaps to weather U.S. monetary announcement effects. This study presents the evidence that there are benefits for fixed-rate payers when the Fed tightens the money supply, but the expected adverse effects on floating-rate payers are not observed. First, this paper shows that assets prices react to the surprising component of the federal funds rate changes rather than the raw interest fluctuations. Second, this paper illustrates the heterogeneous stock returns in response to monetary surprises at both industry and firm levels. Finally, this study explains the sensitivities of the stock returns by companies’ balance sheet information in conjunction with their positions in interest rate swaps contracts.

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Paper presented to the 6th Annual Symposium on Graduate Research and Scholarly Projects (GRASP) held at the Hughes Metropolitan Complex, Wichita State University, April 23, 2010.
Research completed at the Department of Economics, W. Frank Barton School of Business