Shafiq K. Ebrahim

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December 15, 2000

The Federal Government's Use of Interest Rate Swaps and Currency Swaps

Interest rate swaps and currency swaps are contracts in which counterparties agree to exchange cash flows according to a pre-arranged formula over a period of time. Since 1985, the federal government has been using such swaps to manage its liabilities in a cost-effective and flexible manner. The authors outline the characteristics of swap agreements and the ways in which the government uses them. They show that the swap program has been cost-effective, estimating that past and projected savings exceed $500 million. The authors also discuss the methods that the government uses to monitor the counterparty credit risk associated with these transactions.

Volatility Transmission Between Foreign Exchange and Money Markets

Staff Working Paper 2000-16 Shafiq K. Ebrahim
This paper uses trivariate generalized autoregressive conditional heteroscedasticity (GARCH) models to study price and volatility spillovers between the foreign exchange and associated money markets. Three models are estimated using data on U.S. dollar/Canadian dollar, U.S. dollar/Deutsche mark, and U.S. dollar/Japanese yen daily exchange rate returns together with returns on 90-day Eurodollar, Euro Canada, Euromark, and Euroyen deposits.
Content Type(s): Staff Research, Staff Working Papers Topic(s): International financial markets JEL Code(s): G, G1, G15

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