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Showing results 1 to 10 of approximately 29.
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Working Paper
What Drives Bank Funding Spreads?
We use matched, bank-level panel data on Libor submissions and credit default swaps to decompose bank-funding spreads at several maturities into components reflecting counterparty credit risk and funding-market liquidity. To account for the possibility that banks may strategically misreport their funding rates in the Libor survey, we nest our decomposition within a model of the costs and benefits of lying. We find that Libor spreads typically consist mostly of a liquidity premium and that this premium declined at short maturities following Federal Reserve interventions in bank funding ...
Journal Article
Leaving LIBOR
The Fed has developed a new reference rate to replace the troubled LIBOR. Will banks make the switch?
Working Paper
Credit Risk, Liquidity and Lies
We reexamine the relative effects of credit risk and liquidity in the interbank market using bank-level panel data on Libor submissions and CDS spreads. Our model synthesizes previous work by combining the fundamental determinants of interbank spreads with the effects of strategic misreporting by Libor-submitting firms. We find that interbank spreads were very sensitive to credit risk at the peak of the crisis. However, liquidity premia constitute the bulk of those spreads on average, and Federal Reserve interventions coincide with improvements in liquidity at short maturities. Accounting for ...
Working Paper
Option-Implied Libor Rate Expectations across Currencies
In this paper, I study risk-neutral probability densities regarding future Libor rates denominated in British pounds, euros, and US dollars as implied by option prices. I apply Breeden and Litzenberger?s (1978) result regarding the relationship between option prices and implied probabilities for the underlying to estimate full probability density functions for future Libor rates. I use these estimates in case studies, detailing the evolution of probabalistic expectations for future Libor rates over the course of several important market events. Next, I compute distributional moments from ...
Speech
Measure Twice, Cut Once
Remarks at SOFR Symposium: The Final Year (Part II) (delivered via videoconference).
Speech
The importance of incentives in ensuring a resilient and robust financial system: remarks at the U.S. Chamber of Commerce, Washington, D.C.
Remarks at the U.S. Chamber of Commerce, Washington, D.C.
Discussion Paper
How the LIBOR Transition Affects the Supply of Revolving Credit
In the United States, most commercial and industrial (C&I) lending takes the form of revolving lines of credit, known as revolvers or credit lines. For decades, like other U.S. C&I loans, credit lines were typically indexed to the London Interbank Offered Rate (LIBOR). However, since 2022, the U.S. and other developed-market economies have transitioned from credit-sensitive reference rates such as LIBOR to new risk-free rates, including the Secured Overnight Financing Rate (SOFR). This post, based on a recent New York Fed Staff Report, explores how the provision of revolving credit is likely ...
Speech
Remarks at the Culture Imperative – an Interbank Symposium
Remarks at the Culture Imperative ? An Interbank Symposium at the Convene Conference Center, New York City.
Speech
Transitioning Away From LIBOR: Understanding SOFR’s Strengths and Considering the Path Forward
Remarks at the Bank Policy Institute’s Credit-Sensitive Benchmark Symposium (delivered via videoconference).
Speech
Monetary Policy Implementation: Adapting to a New Environment
Remarks before the Money Marketeers of New York University (delivered via videoconference).