Liquidity spillover effect on money market interest rates

Student: Potashov Anatolij

Faculty: International College of Economics and Finance

Educational Programme: Master

Final Grade: 7

Year of Graduation: 2014

<p>Using a broad data set of LIBOR quotes, submitted by major banking institutions, with different currencies and maturities we try to find out whether the liquidity spillover of the US capital market has any influence on the pricing strategy of these banks on money market. Controlling for bank’s exposure to the US market and other bank-specific and macroeconomic variables we show that there is a strong liquidity spillover effect influencing individual spreads between submitted quote and resulting LIBOR benchmark. We provide evidence for that empirically via cross-sectional time-series regression models with fixed effects.</p><p>Keywords: LIBOR, liquidity, financial spillover, pricing strategy</p>

Full text (added June 9, 2014) (974.34 Kb)

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