Abstract
This study investigates pricing efficiency in the yen-dollar currency swap dealer market. Swap mid-rate adjustments are examined to determine how prices adjust to changes in supply and demand. Bid-ask spreads are investigated to find evidence of term premiums. Swap rates are compared to yields on equal maturity bonds to measure default premiums. Results indicate market efficiency as to adjustments to changes in supply and demand and as to term premiums in prices. Default risk premiums in swap rates are inappropriate. Therefore, the market is not completely efficient and dealer swap rates may not relate directly to risks taken.