The Determinants of THB Swap Spreads

Abstract

This paper aims to investigate the determinants of THB swap spreads by combining the traditional explaining variables of previous researches, e.g., default risk premium, liquidity premium and slope of the government bond yield curve, with additional explaining variables that might be missed in the previous studies and unique in THB swap spreads, e.g., TED and macroeconomic factors during the different states of economy, which are classified by Bank of Thailand monetary policy rate and the presence of negative swap spread. The motivation is to investigate the different effect of the determinants of THB swap spread in the different market conditions and negative swap spread period.