Modeling Money Market Spreads: What Do We Learn about Refinancing Risk
Event details
| Date | 30.01.2015 |
| Hour | 10:30 › 12:00 |
| Speaker | Kleopatra NIKOLAOU (Board of Governors of the Federal Reserve System) |
| Location | |
| Category | Conferences - Seminars |
We show that spreads in euro area money markets during the financial crisis were driven by refinancing risk: With the advent of the crisis, borrowers were willing to pay a premium to obtain financing for a given period rather than having to refinance several times. We measure refinancing risk within a proposed model to price EURIBOR-based money market spreads vis-à-vis the overnight index swap. We show that, unless markets freeze, refinancing risk affects the spread significantly across time. Central bank interventions have reduced the spreads as well as the effect of refinancing risk on them.
Links
Practical information
- Informed public
- Free
Contact
- Homepage: http://www.federalreserve.gov/econresdata/kleopatra-nikolaou.htm