The Interday and Intraday Patterns of the Overnight Market: Evidence from an Electronic Platform

Beaupain, Renaud; Durré, Alain

doi:10.2139/ssrn.1310648

Cited by 10 publications

(19 citation statements)

References 12 publications

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“…In this work, we presented an analytic framework based on non-negative tensor factorization (NTF) to extract temporal activity patterns of financial systems. Despite previous studies on online financial markets recognized the existence of trading activity patterns at specific time scales (e.g., inter-day [12], or intra-day [21][22][23]), we demonstrated-to the best of our knowledge for the first time-that activity patterns coexist at different time scales and depend upon each other. Our methodology allowed us to uncover the hidden multi-timescale patterns of trading activities in an online interbank market (e-MID [20]).…”

Section: Discussioncontrasting

confidence: 96%

“…At the daily scale, some banks have transactions only on a certain fraction of business days while having no transactions on the other days [12,21]. If we look at intraday time scales, on the other hand, the frequency of a bank having at least one transaction is not uniformly distributed over the time intervals [21,22]. These X < l a t e x i t s h a 1 _ b a s e 6 4 = " 6 W 5 C R w p S t D m 2 5 D 9 z 3 l c l…”

Section: Methodsmentioning

confidence: 99%

“…In this work, we uncover hidden multi-timescale patterns of banks' activities in the Italian online interbank market, e-MID [20]. In previous studies, it has been recognized that there exist activity patterns in banks' financial transactions at a particular time scale, such as inter-day [12] and intra-day scales [21][22][23]. However, it is still unknown whether these patterns coexisting at different time scales are dependent on each other, in which case banks exhibiting a given interday activity pattern are likely to follow a particular intraday pattern.…”

Section: Introductionmentioning

confidence: 99%

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Extracting the multi-timescale activity patterns of online financial markets

Kobayashi¹,

Sapienza²,

Ferrara³

2018

Sci Rep

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Online financial markets can be represented as complex systems where trading dynamics can be captured and characterized at different resolutions and time scales. In this work, we develop a methodology based on non-negative tensor factorization (NTF) aimed at extracting and revealing the multi-timescale trading dynamics governing online financial systems. We demonstrate the advantage of our strategy first using synthetic data, and then on real-world data capturing all interbank transactions (over a million) occurred in an Italian online financial market (e-MID) between 2001 and 2015. Our results demonstrate how NTF can uncover hidden activity patterns that characterize groups of banks exhibiting different trading strategies (normal vs. early vs. flash trading, etc.). We further illustrate how our methodology can reveal “crisis modalities” in trading triggered by endogenous and exogenous system shocks: as an example, we reveal and characterize trading anomalies in the midst of the 2008 financial crisis.

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Section: Discussioncontrasting

confidence: 96%

Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Extracting the multi-timescale activity patterns of online financial markets

Kobayashi¹,

Sapienza²,

Ferrara³

2018

Sci Rep

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“…1 The market is subject to the supervision of the Bank of Italy, and is open to both Italian and foreign banks. eMID covers the whole domestic liquidity deposit market in Italy, as well as a significant share of the entire liquidity deposit market in the Euro area (Beaupain and Durré, 2008).…”

Section: A Emid Datamentioning

confidence: 99%

Structural changes in the interbank market across the financial crisis from multiple core–periphery analysis

Kojaku¹,

Cimini²,

Caldarelli³

et al. 2018

JNTF

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Interbank markets are often characterised in terms of a core-periphery network structure, with a highly interconnected core of banks holding the market together, and a periphery of banks connected mostly to the core but not internally. This paradigm has recently been challenged for short time scales, where interbank markets seem better characterised by a bipartite structure with more core-periphery connections than inside the core. Using a novel core-periphery detection method on the eMID interbank market, we enrich this picture by showing that the network is actually characterised by multiple core-periphery pairs. Moreover, a transition from core-periphery to bipartite structures occurs by shortening the temporal scale of data aggregation. We further show how the global financial crisis transformed the market, in terms of composition, multiplicity and internal organisation of core-periphery pairs. By unveiling such a fine-grained organisation and transformation of the interbank market, our method can find important applications in the understanding of how distress can propagate over financial networks. Key messages• We study the eMID interbank market using a novel core-periphery detection method to unveil its high-order network organization.• We reveal multiple core-periphery pairs, and detect both tiered and bow-tie (bipartite) structures.• We reveal a topological transition of the market at the global financial crisis, in terms of network segregation and organization. *

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“…The electronic Market for Interbank Deposits (e-MID) is a trading platform of unsecured money-market loans, 1 that is unique in the Euro area for being screen-based and fully electronic. e-MID covers the entire domestic overnight deposit market in Italy, but is open to both Italian and foreign banks, and a significant share of all liquidity deposit in the Euro area is traded through the e-MID platform [52]. The dataset we have at our disposal consists of all the interbank transactions finalized on e-MID from January 1999 to September 2012.…”

Section: E-mid Datamentioning

confidence: 99%

Epidemics of liquidity shortages in interbank markets

Brandi

Clemente

Cimini

2018

Physica A: Statistical Mechanics and its Applications

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Financial contagion from liquidity shocks has being recently ascribed as a prominent driver of systemic risk in interbank lending markets. Building on standard compartment models used in epidemics, in this work we develop an EDB (Exposed-Distressed-Bankrupted) model for the dynamics of liquidity shocks reverberation between banks, and validate it on electronic market for interbank deposits data. We show that the interbank network was highly susceptible to liquidity contagion at the beginning of the 2007/2008 global financial crisis, and that the subsequent micro-prudential and liquidity hoarding policies adopted by banks increased the network resilience to systemic risk-yet with the undesired side effect of drying out liquidity from the market. We finally show that the individual riskiness of a bank is better captured by its network centrality than by its participation to the market, along with the currently debated concept of "too interconnected to fail".

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The Interday and Intraday Patterns of the Overnight Market: Evidence from an Electronic Platform

Cited by 10 publications

References 12 publications

Extracting the multi-timescale activity patterns of online financial markets

Extracting the multi-timescale activity patterns of online financial markets

Structural changes in the interbank market across the financial crisis from multiple core–periphery analysis

Epidemics of liquidity shortages in interbank markets

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