The Research Foundation of AIMR & Blackwell Series in Finance

1 total work

Interest Rate Modeling and the Risk Premiums in Interest Rate Swaps

by Robert Brooks

Published 15 January 1991

This monograph addresses the return side of the decision to use interest rate swaps or other interest-rate-contingent claims. Because the economic costs of decisions related to a company's policies toward debt maturities are important to stock price performance, the analysis in this monograph has practical implications for investment analysts. Brooks demonstrates how an at-the-market swap with a risk premium can have a significant impact on the expected return from using the swap.