Liu, Jun; Longstaff, Francis A.; Mandell, Ravit E. - In: The Journal of Business 79 (2006) 5, pp. 2337-2360
We study how the market prices the default and liquidity risks incorporated into interest rate swap spreads. We jointly model the Treasury, repo, and swap term structures using a five-factor affine framework and estimate the model by maximum likelihood. The credit spread is driven by a...