Analysis of Relationship between MIBOR and MIFOR interest rate swap Markets

Velmurugan PS, Veeraraghavan R, Rinku Champramary

Abstract


The study tries to put forward the analysis of relationship between MIBOR and MIFOR based interest rate swap using an econometric model like Johansen’s co-integration test, and Granger’s Causality test. The Johansen test result reveals existence of long-term relationship between MIBOR & MIFOR –IRS for 1 and 5 years’ tenor; whereas in case of 2 and 3-year tenor no Co-integration. Granger Causality test result between MIBOR and MIFOR-IRS shows the direction of relationship as bidirectional for 1 and 5 years’ tenor, whereas rest of 2 and 3 years’ tenor were unidirectional.

Key Words: MIBOR, MIFOR, Granger’s Causality, IRS


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ISSN : 2251-1547