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An Economic Analysis of Interest Rate Swaps

James L. Bicksler, Andrew H. Chen

Open publisher page 147 citations

Abstract

ABSTRACT Interest rate swaps, a financial innovation in recent years, are based upon the principle of comparative advantage. An interest rate swap is a useful tool for active liability management and for hedging against interest rate risk. The purpose of this paper is to provide a simple economic analysis of interest rate swaps. Alternative uses of and the appropriate valuation procedure for interest rate swaps are described.

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What this paper is about

ABSTRACT Interest rate swaps, a financial innovation in recent years, are based upon the principle of comparative advantage. An interest rate swap is a useful tool for active liability management and for hedging against interest rate risk. The purpose of this paper is to provide a simple economic analysis of interest rate swaps. Alternative uses of and the appropriate valuation procedure for interest rate swaps are described.

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OpenAlex reports 147 citations for this work. Citation counts describe recorded attention and do not establish research quality.

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Available abstract

ABSTRACT Interest rate swaps, a financial innovation in recent years, are based upon the principle of comparative advantage. An interest rate swap is a useful tool for active liability management and for hedging against interest rate risk. The purpose of this paper is to provide a simple economic analysis of interest rate swaps. Alternative uses of and the appropriate valuation procedure for interest rate swaps are described.

Key concepts: Interest rate swap, Swap (finance), Interest rate derivative, Interest rate, Interest rate risk, Economics, Valuation (finance), Liability

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