Rate curves for overnight loans between bank pairs, as functions of loan values, can be used to infer valuation of reserves by banks. The inferred valuation can be used to interpret shifts in rate curves between bank pairs, for example, in response to a financial crisis. This paper proposes a...

Currently, Eurodollars and fed funds markets combined trade about $220 billion in funds daily, the vast majority of which with overnight tenor. In this paper, we document several features of these wholesale unsecured dollar funding markets. Using daily confidential data on wholesale unsecured...

As a result of legal restrictions on branch banking, an extensive interbank system developed in the United States during the 19th century to facilitate interregional payments and flows of liquidity and credit. Vast sums moved through the interbank system to meet seasonal and other demands, but...

The concentration of risk within financial system is considered to be a source of systemic instability. We propose a theory to explain the structure of the financial system and show how it alters the risk taking incentives of financial institutions. We build a model of portfolio choice and...

In recent years, the scale and scope of major central banks' intervention in financial markets has expanded in unprecedented ways. In this paper, we demonstrate how monetary policy implementation that relies on such intervention in financial markets can displace private transactions....

We study the behavior of the interbank market before, during and after the 2008 financial crisis. Leveraging recent advances in network analysis, we study two network structures, a correlation network based on publicly traded bank returns, and a physical network based on interbank lending...

Large-scale asset purchases by the Federal Reserve as well as new Basel III banking regulations have led to important changes in U.S. money markets. Most notably the interbank market has essentially disappeared with the dramatic increase in excess reserves held by banks. We build a model in the...

We study the behavior of the interbank market before, during and after the 2008 financial crisis. Leveraging recent advances in network analysis, we study two network structures, a correlation network based on publicly traded bank returns, and a physical network based on interbank lending...

We construct a Financial Stress Index (FSI) for a small open economy, which aims to provide clear and timely signals of financial market strains. This can be used in developing appropriate responses to address these adverse events. To do so, we use the principal component framework and apply it...

When available financial securities allow investors to optimally diversify risk across countries, standard theory implies that exchange rates should reflect this behavior. However, exchange rates observed in the data deviate from these predictions. In this paper, we develop a framework to value...