Dissecting interbank risk using basis swap spreads
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Other documents of the author: Lafuente-Luengo, Juan Angel; Petit, Nuria; Ruiz, Jesus; Serrano, Pedro
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comunitat-uji-handle2:10234/8648
comunitat-uji-handle3:10234/8649
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https://doi.org/10.1111/twec.12878 |
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Title
Dissecting interbank risk using basis swap spreadsDate
2019Publisher
WileyISSN
0378-5920; 1467-9701Bibliographic citation
LAFUENTE, Juan Ángel, et al. Dissecting interbank risk using basis swap spreads. The World Economy, 2019Type
info:eu-repo/semantics/articlePublisher version
https://onlinelibrary.wiley.com/doi/full/10.1111/twec.12878Version
info:eu-repo/semantics/publishedVersionSubject
Abstract
This paper analyses interbank risk using the information content of basis swap (BS) spreads, floating‐to‐floating interest rate swaps whose payments are associated with euro deposit rates for alternative tenors. To ... [+]
This paper analyses interbank risk using the information content of basis swap (BS) spreads, floating‐to‐floating interest rate swaps whose payments are associated with euro deposit rates for alternative tenors. To identify the impact of shocks affecting interbank risk, we propose an empirical model that decomposes BS quotes into their expected and unexpected components. These unobservable constituents of BS spreads are estimated by solving a signal extraction problem using a particle filter. We find that expected components covariate with aggregate liquidity and risk aversion while systemic risk arises as the main driver behind unexpected fluctuations. Our empirical findings suggest that macroprudential analysis emerges as a key device to ease asset pricing in a new multi‐curve scenario. [-]
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The World Economy, 2019Investigation project
Ministerio de Economía y Competitividad, Grant/Award Number: 2016/00118/001 and ECO2015‐67305‐P; Generalitat Valenciana, Grant/Award Number: PROMETEOII/2013/015; Consejería de Economía, Innovación, Ciencia y Empleo, Junta de Andalucía, Grant/Award Number: P12‐SEJ‐1733; Fundación Ramón ArecesRights
© 2019 John Wiley & Sons Ltd
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