| dc.description.abstract | Among articles published in the past on the relationship between different interest rate products, scholars focused on bonds only, hardly on IRS. This is because the Taiwan Dollar IRS is traded on OTC market. As such，past data on IRS are difficult to obtain. This thesis aims to study the relationship between the government bond and IRS yirlds. I pick Taiwan 2, 5, and 10 year government bond and IRS daily yields from January 10, 2003 to May 12, 2006 as study samples. The empirical result shows that the yields between Taiwan 2, 5, and 10 year government bond and IRS are both I(1) time series. The yield relationship between Taiwan 5 and 10 year government bond and IRS demonstrate long term cointegration. and exhibit long term stable equilibrium . From Vector Error Correction model analysis, this study also show that close equilibrium relationshipexists between these two variables. By way of Granger Cause Test, I test the causality relationship between these variables. I find that at 95% confidence level,t(0) IRS2Year and IRS5Year will affect t(1) BOND2Year and BOND5Year. In addition, t(0) BOND10Year will affect IRS10Year. At 90% confidence level, t(0) BOND2Year will affect t(1) IRS2Year. This test also shows that , through the entire yield curve, one variable shows the same directional influence on the other variable. Moreover, the yields between two- year government bond and IRS exhibit a bi-direction at 90% confidence level. Besides, in Impulse-response terms, the government bond yields and IRS are most strongly affected by themselves (i.e. Bond t(1) is most dependent on Bond t(0)；Similarly IRS t(1) is most dependent on IRS T(0)). This impact dwindles with time. Generally speaking ,these variable exhibit positive correlation amongst themselves。 | en_US |