It is well documented in literature that funding condition has been subject to the undue influence of distorted incentives of banks to lend and borrow at quarter ends under Basel III. We investigate whether or not funding risk possibly also suffers the same. Using a state space model, we find...

The emergence and persistence of basis spreads in cross-currency basis swaps (CCBSs) since the global financial crisis have become a mystery in international finance, as they violate the longstanding principle of covered interest parity (CIP). We argue that the phenomenon is no mystery but...