There is much discussion about derivatives at central banks. The main focus is on questions about the impact of the growing use of derivative instruments on the stability of the financial markets and the effectiveness ofmonetary policy measures. Irrespective ofthe answers, the information...

Central banks' operations and efficiency arguments would suggest that the intraday interest rate should be set to zero. However, a liquidity crisis introduces frictions related to news, which can cause an upward jump of the intraday rate. This paper documents that these dynamics can be partially...