what do you think we need to know for this one? explain the swap rate curve (LIBOR curve) and discuss the reasons that market participants have increasingly used the swap rate curve as a benchmark rather than a government bond yield curve
Coz. most companies have their liabilities based on LIBOR
Well I believe there is more maturities related to Swaps which is better than the gov’t bonds. Also swaps aren’t influenced by government so you can compare them across different countries.
andvatages to using swap curve: - no governement regulation, so they are more comparable across different markets - supply depends only on counterparty demand - no sovergin credit risk - more maturity points to construct a curve
use labor rate because it reflects credit risk.