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Asset Swap Spreads
Does anybody know any good texts for me to read up on modeling asset swap spreads on government bonds.
Asset Swap Spreads
Multi factor regressions are often used to value swap spreads.Some factors which apparently do the job are: shape of the govies curve (= spread 2y/10y), expected supply of govies, risk aversion ...Use levels not changes when regressing.Hope this helps.I'll have a look if I find any research on this.Brown
Asset Swap Spreads
Many thanks......I generally use the 2Y-10Y spread, the level of rates (perhaps the 10Y if I'm trying to model 10Y ASWs)and the GC-Libor spread for short-dated ASWs........but I tend to avoid the relative supply of govies/other debt since I'm not convinced that this has anything other than a very short-term impact......also, I think the relationship between this factor and ASWs is unstable anyway......but am under pressure from the 'powers that be' to come up with a 'new' model......