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Limits to arbitrage during the crisis : funding liquidity constraints and covered interest parity
Mancini Griffoli, Tommaso; Ranaldo, Angelo - 2014
Arbitrage ensures that covered interest parity holds. The condition is central to price foreign exchange forwards and … interbank lending rates, and reflects the efficient functioning of markets. Normally, deviations from arbitrage, if any, last … seconds and reach a few basis points. After the Lehman bankruptcy, instead, arbitrage profits were large, persisted for months …
Persistent link: https://www.econbiz.de/10010407205
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Peso-Dollar forward market analysis : explaining arbitrage opportunities during the financial crisis
Hernández, Juan R. - 2014
Using a vector error correction model I test whether shocks in the funding liquidity conditions in the U.S. and Europe separately explain deviations from the covered interest parity (CIP) between the U.S. Dollar and the Mexican Peso. I find that: (1) Apparent deviations from the CIP seem to be...
Persistent link: https://www.econbiz.de/10010370903
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Limits to arbitrage and deviations from covered interest rate parity
Pinnington, James; Shamloo, Maral - 2016
We document an increase in deviations from short-term covered interest rate parity (CIP) in the first half of 2015. Since the Swiss National Bank's (SNB) decision to abandon its minimum exchange rate policy, both the magnitude and volatility of deviations from CIP have increased across several...
Persistent link: https://www.econbiz.de/10011422049
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Segmented Money Markets and Covered Interest Parity Arbitrage
Rime, Dagfinn - 2017
This paper studies the violation of the most basic no-arbitrage condition in international finance - Covered Interest … across the full rate spectrum. A narrow set of global top-tier banks enjoys risk-less arbitrage opportunities as dealers set … quotes to avert order flow imbalances. We show how a situation with persistent arbitrage profits arises as an equilibrium …
Persistent link: https://www.econbiz.de/10012952174
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Segmented Money Markets and Covered Interest Parity Arbitrage
Rime, Dagfinn - 2017
This paper studies the violation of the most basic no-arbitrage condition in international finance — Covered Interest …-less arbitrage opportunities as dealers set quotes to avert order flow imbalances. A situation with persistent arbitrage …
Persistent link: https://www.econbiz.de/10012945047
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Foreign-currency bonds : currency choice and the role of uncovered and covered interest parity
Habib, Maurizio Michael; Joy, Mark - 2008
Using count-data techniques, this paper studies the determinants of currency choice in the issuance of foreign-currency-denominated bonds. In particular, we investigate whether bond issuers choose their issuance currency in order to exploit the borrowing-cost savings associated with deviations...
Persistent link: https://www.econbiz.de/10003794028
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Foreign-Currency Bonds : Currency Choice and the Role of Uncovered and Covered Interest Parity
Habib, Maurizio Michael; Joy, Mark - 2021
Using count-data techniques, this paper studies the determinants of currency choice in the issuance of foreign-currency-denominated bonds. In particular, we investigate whether bond issuers choose their issuance currency in order to exploit the borrowing-cost savings associated with deviations...
Persistent link: https://www.econbiz.de/10013316472
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Funding Liquidity Risk and Deviations from Interest-Rate Parity During the Financial Crisis of 2007-2009
Hui, Cho-Hoi - 2011
Significant deviations from covered interest parity were observed during the financial crisis of 2007-2009. This paper finds that before the failure of Lehman Brothers the market-wide funding liquidity risk was the main determinant of these deviations in terms of the premiums on swap-implied US...
Persistent link: https://www.econbiz.de/10013134511
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Capital constraints, counterparty risk, and deviations from covered interest rate parity
Coffey, Niall; Hrung, Warren B.; Sarkar, Asani - 2009 - Rev.
. These results indicate a breakdown of arbitrage transactions in the international capital markets during the crisis that …
Persistent link: https://www.econbiz.de/10003947651
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Models of Speculative Attacks and Crashes in International Capital Markets
Marini, Giancarlo - 2014
Currency and financial turmoils in international capital markets have been the focus of an extensive theoretical research which started around 30 years ago. This paper provides a synthetic overview of this theoretical modeling. We analyze the basic analytical framework corresponding to the...
Persistent link: https://www.econbiz.de/10013065790