Determinants of the multiple-term structures from interbank rates

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Show simple item record Petit, Nuria Serrano Jiménez, Pedro José Lafuente Luengo, Juan Ángel
dc.contributor.editor Universidad Carlos III de Madrid. Departamento de Economía de la Empresa 2015-06-19T17:55:44Z 2015-06-19T17:55:44Z 2015-06
dc.identifier.issn 2387-175X
dc.description.abstract The classic relationship between deposit rates and interest rate derivatives has been fractured since August 2007. Uncertainty in the interbank money market has increased the risk premia differentials on unsecured deposits rates of different tenors, such as Euribor, leading to a new pricing framework of interest rate derivatives based on multiple curves. This article analyzes the economic determinants of this new multi-curve framework. We employ basis swap (BS) spreads &-floating-to-floating interest rate swaps- as instruments for extracting the interest rate curvedifferentials. Our results show that the multi-curve framework mirrors the standard single-curve setting in terms of level, slope and curvature factors. The level factor captures 90% of the total variation in the curves, and this factor significantly covaries with a proxy for systemic risk. Moreover, the curve residuals are significantly correlated with interbank liquidity. Our empirical findings also show unidirectional causality running from risk (and liquidity) to level (and noise) factors.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries UC3M Working Papers Business
dc.relation.ispartofseries 15-02
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.subject.other Basis swap
dc.subject.other Noise measure
dc.subject.other Credit risk
dc.subject.other Liquidity risk
dc.subject.other Capital arbitrage
dc.title Determinants of the multiple-term structures from interbank rates
dc.type workingPaper
dc.rights.accessRights openAccess
dc.type.version submittedVersion
dc.identifier.uxxi DT/0000001379
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