Fixed-income arbitrage strategies: swap spread arbitrage and yield curve arbitrage
De Figueiredo Neto, Carlos (2012-12-05)
C. De Figueiredo Neto
05.12.2012
© 2012 Carlos De Figueiredo Neto. Tämä Kohde on tekijänoikeuden ja/tai lähioikeuksien suojaama. Voit käyttää Kohdetta käyttöösi sovellettavan tekijänoikeutta ja lähioikeuksia koskevan lainsäädännön sallimilla tavoilla. Muunlaista käyttöä varten tarvitset oikeudenhaltijoiden luvan.
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:oulu-201309271742
https://urn.fi/URN:NBN:fi:oulu-201309271742
Tiivistelmä
There is a mythical question, well described by Duarte, Longstaff and Yu (2006), whether fixed-income arbitrage strategies are truly arbitrage or merely strategies that earn small positive returns most of the time, but occasionally experience dramatic losses. The question can be summarized in the anecdote “picking up nickels in front of a steamroller”. This master’s thesis studies two of these specific fixed-income arbitrage strategies: Swap Spread Arbitrage and Yield Curve Arbitrage.
The methodology used in this master’s thesis is to apply these two arbitrage strategies through time from November 1988 to December 2011, using R language coding developed by the author of the master’s thesis, and to analyze their risk and return characteristics. The data used in this master’s thesis was gathered from different sources such as: Bloomberg™, Federal Reserve System (FED), Thompson Reuters Datastream™, Federal Reserve Bank of St. Louis, Kenneth French and Yahoo® Finance.
The main hypothesis of this thesis is that the global financial crisis of 2008 had a big impact on these strategies return indexes. This proved to be wrong. These two fixed-income arbitrage strategies seem profitable on the long run even under financial crisis cycles, as they generate positive excess returns, and Yield Curve Arbitrage strategy even with significant α.
The methodology used in this master’s thesis is to apply these two arbitrage strategies through time from November 1988 to December 2011, using R language coding developed by the author of the master’s thesis, and to analyze their risk and return characteristics. The data used in this master’s thesis was gathered from different sources such as: Bloomberg™, Federal Reserve System (FED), Thompson Reuters Datastream™, Federal Reserve Bank of St. Louis, Kenneth French and Yahoo® Finance.
The main hypothesis of this thesis is that the global financial crisis of 2008 had a big impact on these strategies return indexes. This proved to be wrong. These two fixed-income arbitrage strategies seem profitable on the long run even under financial crisis cycles, as they generate positive excess returns, and Yield Curve Arbitrage strategy even with significant α.
Kokoelmat
- Avoin saatavuus [26782]