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In Rememberance: World Trade Center (WTC)

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Sun, Tong-sheng, Surech Sundaresan, and Ching Wang, "Interest Rate Swaps: An empirical investigation", Journal of Financial Economics, Vol. 34, No. 1, (August 1993), pp. 77-99.

Abstract: Using quotations from two interest rate swap dealers with different credit ratings (AAA and A), we examine the effect of dealers' credit reputations on swap quotes and bid-offer spreads. The AAA offer rates are significantly higher than the A offer rates, and the AAA bid rates are significantly lower than the A bid rates. We also document the relation between swap rates and par bond yields estimated from London interbank offered rate (LIBOR) and bid rate (LIBID) data. We identify some of the problems in testing the implications of swap pricing theory.