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LIBOR: Origins, economics, crisis, scandal, and reform

Hou, David; Skeie, David - 2014

The London Interbank Offered Rate (LIBOR) is a widely used indicator of funding conditions in the interbank market. As of 2013, LIBOR underpins more than $300 trillion of financial contracts, including swaps and futures, in addition to trillions more in variable-rate mortgage and student loans....

Persistent link: https://www.econbiz.de/10011340948

Is size everything?

Antill, Samuel; Sarkar, Asani - 2018

We examine sources of systemic risk (threshold size, complexity, and interconnectedness) with factors constructed from equity returns of large financial firms, after accounting for standard risk factors. From the factor loadings and factor returns, we estimate the implicit government subsidy for...

Persistent link: https://www.econbiz.de/10012144707

Liquidity, volatility, and flights to safety in the US treasury market: Evidence from a new class of dynamic order book models

Engle, Robert; Fleming, Michael; Ghysels, Eric; Nguyen, … - 2012

We propose a new class of dynamic order book models that allow us to 1) study episodes of extreme low liquidity and 2) unite liquidity and volatility in one framework through which their joint dynamics can be examined. Liquidity and volatility in the U.S. Treasury securities market are analyzed...

Persistent link: https://www.econbiz.de/10010333574

Financial amplification of foreign exchange risk premia

Adrian, Tobias; Etula, Erkko; Groen, Jan J. J. - 2010

Theories of systemic risk suggest that financial intermediaries' balance-sheet constraints amplify fundamental shocks. We provide supportive evidence for such theories by decomposing the U.S. dollar risk premium into components associated with macroeconomic fundamentals and a component...

Persistent link: https://www.econbiz.de/10010287155

Informational contagion in the laboratory

Cipriani, Marco; Guarino, Antonio; Guazzarotti, Giovanni; … - 2015

We study the informational channel of financial contagion in the laboratory. In our experiment, two markets with … from the market that opens first. As a result, we observe financial contagion in the laboratory: Indeed, the correlation … between asset prices is very close to that predicted by the theory. Finally, as theory predicts, there is no contagion when …

Persistent link: https://www.econbiz.de/10011340963

Stigma in financial market: Evidence from liquidity auctions and discount window borrowing during the crisis

Armantier, Olivier; Ghysels, Eric; Sarkar, Asani; … - 2011

We provide empirical evidence for the existence, magnitude, and economic impact of stigma associated with banks borrowing from the Federal Reserve's discount window facility. We find that, during the height of the financial crisis, banks were willing to pay an average premium of at least 37...

Persistent link: https://www.econbiz.de/10010287025

Market declines: is banning short selling the solution?

Battalio, Robert; Mehran, Hamid; Schultz, Paul - 2011

In response to the sharp decline in prices of financial stocks in the fall of 2008, regulators in a number of countries banned short selling of particular stocks and industries. Evidence suggests that these bans did little to stop the slide in stock prices, but significantly increased costs of...

Persistent link: https://www.econbiz.de/10010287096

Did liquidity providers become liquidity seekers?

Choi, Jaewon; Shachar, Or - 2013

The misalignment between corporate bond and credit default swap (CDS) spreads (i.e., CDSbond basis) during the 2007-09 financial crisis is often attributed to corporate bond dealers shedding off their inventory, right when liquidity was scarce. This paper documents evidence against this...

Persistent link: https://www.econbiz.de/10010333633

Global price of risk and stabilization policies

Adrian, Tobias; Stackman, Daniel; Vogt, Erik - 2016

We estimate a highly significant price of risk that forecasts global stock and bond returns as a nonlinear function of the CBOE Volatility Index (VIX). We show that countries' exposure to the global price of risk is related to macroeconomic risks as measured by output, credit, and inflation...

Persistent link: https://www.econbiz.de/10011538016

Tick size change and market quality in the U.S. treasury market

Fleming, Michael J.; Nguyen, Giang H.; Ruela, Francisco - 2019

This paper studies a recent tick size reduction in the U.S. Treasury securities market and identifies its effects on the market's liquidity and price efficiency. Employing difference-indifference regressions, we find that the bid-ask spread narrows significantly after the change, even for large...

Persistent link: https://www.econbiz.de/10012144729