Hoarding and short-squeezing in times of crisis: Evidence from the Euro overnight money market

Brossard, Olivier; Saroyan, Susanna

doi:10.1016/j.intfin.2015.09.002

Cited by 12 publications

(7 citation statements)

References 45 publications

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“…Anand et al (2012) study bad news propagation within the interbank market and show how funding maturity and network structure interact to generate systemic financial crises. Brossard and Saroyan (2016) show that banks liquidity influences the overnight rates in the interbank market and show that this is probably explained by hoarding and short-squeezing behaviors.…”

Section: Related Literaturementioning

confidence: 90%

Margin requirements and systemic liquidity risk

Bakoush

Gerding

Wolfe

2019

Journal of International Financial Markets, Institutions and Mo

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We develop a model in which margin procyclicality and the propensity for liquidity hoarding interact to generate a systemic liquidity crisis. In this model, banks lend and borrow in the interbank market to mitigate liquidity risk and trade derivatives contracts in the OTC derivatives market to mitigate market risk. The daily mark-to-market of derivatives contracts results in daily margin calls that banks cover using high quality liquid assets. We find that distress due to margin procyclicality in the derivatives market can spillover to the interbank market leading to systemic liquidity risk. Interconnectedness further amplifies the effects of systemic risk within the interbank market. The model shows that central clearing might increase the possibility of systemic liquidity risk due to tight margin requirements and the timing of cash flows required from banks. We also find that haircut levels affect the possibility of systemic liquidity risk, and highlight the potential role of a market maker of last resort in limiting this possibility.

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Section: Related Literaturementioning

confidence: 90%

Margin requirements and systemic liquidity risk

Bakoush

Gerding

Wolfe

2019

Journal of International Financial Markets, Institutions and Mo

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“…Among them were 30 central banks and two finance ministries, which worked as market observers, and 108 domestic (Italian) and 106 international banks as active market participants (Gabbi et al 2012). For a detailed description and explanation of e-MID see e.g., Gabbi et al (2012) or Brossard and Saroyan (2016).…”

Section: The E-midmentioning

confidence: 99%

Empirical Estimation of Intraday Yield Curves on the Italian Interbank Credit Market e-MID

Demertzidis

Jeleskovic

2021

JRFM

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This paper introduces a major novelty: the empirical estimation of spot intraday yield curves based on tick-by-tick data on the Italian electronic interbank credit market (e-MID). To analyze the consequences of the recent financial crisis, we split the data into four periods, which include events before, during, and after the recent financial crisis starting in 2007. Our first result is that, from a practical point of view, the intraday yield curve can be modeled by standard models for yield curves providing advantages for intraday trading on intraday interbank credit markets. Moreover, the estimates show that the systematic dynamics in the intraday yield curves during the turmoil were highly noticeable, resulting in a significantly better goodness-of-fit. Based on this fact, we infer that investors in the interbank credit market base their investment decisions on the effects of the intraday dynamics of intraday interest rates more intensively during a financial crisis. Therefore, the systematic impact on the e-MID appears to be stronger and econometric modeling of the intraday interest rate curve becomes even more attractive during a turmoil.

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“…Otherwise, the political implications of the resulting funding liquidity risk premiums would have been worsened. The lender should act as a last resort in order for the interbank markets to allocate liquidity efficiently (Brossard and Saroyan, 2016).…”

Section: Policy Implicationsmentioning

confidence: 99%

Reaction of EU stock markets to ECB policy interventions

Vortelinos

Γκίλλας

2019

IJBAAF

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This paper investigates the significance and impact of ECB policy interventions on European stock markets. We conducted an event study and a regression analysis. Our data is drawn from the stock indices of the countries of all 28 members of the European Union (Euro members and non-euro members). Our dataset begins on 1 January 2001 and ends on 31 December 2014, for a total of 3,906 trading days. During the sample period, 394 policy interventions are considered as significant dates. Our results provide strong evidence in favour of a positive and statistically significant reaction to most of the ECB's policy interventions. The most important category of events is the financial sector (FSE).

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Hoarding and short-squeezing in times of crisis: Evidence from the Euro overnight money market

Cited by 12 publications

References 45 publications

Margin requirements and systemic liquidity risk

Margin requirements and systemic liquidity risk

Empirical Estimation of Intraday Yield Curves on the Italian Interbank Credit Market e-MID

Reaction of EU stock markets to ECB policy interventions

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