The Price of Risk at Year-End: Evidence from Interbank Lending

Furfine, Craig

doi:10.2139/ssrn.181668

Cited by 7 publications

(8 citation statements)

References 21 publications

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“…For the US, Furfine (1999) showed that the log of total Fed-wire fund transfers is positively significant in explaining federal fund rate changes. In a subsequent contribution (Furfine, 2000), the same author verified a significant positive correlation within the maintenance period between the federal funds daily rate and payment transfers, both in levels and volatility.…”

Section: Rossi and Tauchen 1992)mentioning

confidence: 99%

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Explaining cross-border large-value payment flows: Evidence from TARGET and EURO1 data

Rosati

Secola

2006

Journal of Banking & Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in C O N T E N T SAbstract 4

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Section: Rossi and Tauchen 1992)mentioning

confidence: 99%

“…The same values for LCH were respectively 65% and 95% (the two CCPs merged in 2003). 20 The Table 17, p.28).…”

Section: Re-estimating the Model At Monthly Frequencymentioning

confidence: 99%

Explaining cross-border large-value payment flows: Evidence from TARGET and EURO1 data

Rosati

Secola

2006

Journal of Banking & Finance

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“…Window dressing is used by institution that want to appear more attractive near reporting periods and has been studied by several researchers. Furfine (1999) found a significant increase in the price in the federal funds market at year-end that for a part is due to window dressing. Heijmans et al (2013) find that Dutch money market rates contain a monthly calender effect, which indicates window dressing.…”

Section: The Lcr Statisticmentioning

confidence: 99%

Liquidity Coverage Ratio in a Payments Network: Uncovering Contagion Paths

Heuver

Berndsen

2020

SSRN Journal

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The Liquidity Coverage Ratio (LCR) requirement of the Basel III framework is aimed at making banks more resilient against liquidity shocks and indicates the extent to which a bank is able to meet its payment obligations over a 30-day stress period. Notwithstanding the fact that it forms an important addition to the available information for regulators, it presents information on the status of a single bank on a monthly reporting basis. In this paper we generate an LCR-like statistic on a daily basis and simulate liquidity failure of each of the systemically important banks, using historical payments data from TARGET2. The aim of the paper is to uncover paths of contagion. The trigger is a bank with a deteriorating LCR and the knock-on effect is modelled as the impact on the LCR of other banks. We generate then the cascade of contagion, which in general consists of multiple paths, trying to answer the question to what extent the financial network further deteriorates. In doing so we provide paths of contagion which give a sense of potential systemic risk present in the network. We find that the majority of damage is caused by a small group of large banks. Furthermore we find groups of banks that are very vulnerable to shocks, regardless of the size or location of the disruption. Our model reveals that the shortfall of liquidity at the stressed bank is a more important driver than the addition of liquidity at the other banks. A version of the contagion network based on a 14-day period reveals a monthly pattern, which is in line with other literature in which window dressing is addressed. The data used in this paper are available to supervisors, central banks and resolution authorities, therefore making it possible to anticipate contagion of failing liquidity coverage within their payment network on a daily basis.

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“…These authors show that financial instruments maturing across the year-end trade at a discount. This effect is explained by the motivation of window dressing or higher demand for liquidity but Furfine (1999) argued that this effect can not be explained by these reasons.…”

Section: ∑ ∑mentioning

confidence: 99%

“…They also find some differences in the behavior of excess returns across holding periods of bonds. (Park and Reinganum, 1986;Allen and Saunders, 1992;Musto, 1997;Griffiths and Winters, 1997;Furfine, 1999). These authors show that financial instruments maturing across the year-end trade at a discount.…”

Section: ∑ ∑mentioning

confidence: 99%

Intraday Predictability of Overnight Interest Rates

Lee

2003

SSRN Journal

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Lee (2001) found that the overnight Eurodollar rate in London and the effective Fed funds rate exhibit similar calendar day effects although the absolute magnitudes are slightly less. The excess return on overnight Eurodollars over Fed funds is predictable based on the lagged overnight Eurodollar rate, the lagged Fed funds rate and calendar day dummies. Explanations for the smaller calendar day effects on the overnight Eurodollar rate at 11:00 am GMT than on the effective Fed funds rate, and the predictable excess return include the difference between market-specific conventions in the two markets and the time difference in measuring the two overnight interest rates. This paper investigates the relationship between the Fed funds rate at 11:30 am EST, the effective Fed funds rate and the overnight Eurodollar rate in London. It is found that the predictable excess return is caused by both the difference between the market structures and by the measuring time difference.

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The Price of Risk at Year-End: Evidence from Interbank Lending

Cited by 7 publications

References 21 publications

Explaining cross-border large-value payment flows: Evidence from TARGET and EURO1 data

Explaining cross-border large-value payment flows: Evidence from TARGET and EURO1 data

Liquidity Coverage Ratio in a Payments Network: Uncovering Contagion Paths

Intraday Predictability of Overnight Interest Rates

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