A Sampling-Window Approach to Transactions-Based Libor Fixing
Stanford University - Graduate School of Business; National Bureau of Economic Research (NBER)
David R. Skeie
Texas A&M University - Mays Business School - Department of Finance
James I. Vickery
Federal Reserve Bank of New York
February 1, 2013
FRB of New York Staff Report No. 596
We examine the properties of a method for fixing Libor rates that is based on transactions data and multi-day sampling windows. The use of a sampling window may mitigate problems caused by thin transaction volumes in unsecured wholesale term funding markets. Using two partial data sets of loan transactions, we estimate how the use of different sampling windows could affect the statistical properties of Libor fixings at various maturities. Our methodology, which is based on a multiplicative estimate of sampling noise that avoids the need for interest rate data, uses only the timing and sizes of transactions. Limitations of this sampling-window approach are also discussed.
Number of Pages in PDF File: 21
Keywords: Libor, interbank, transactions-based fixing, sampling window, shadow banking, financial intermediation
JEL Classification: G01, G10, G18, G28
Date posted: February 5, 2013
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