Libor Manipulation: Cui Bono?
Mendoza College of Business, University of Notre Dame
University of Notre Dame
Jens Carsten Jackwerth
University of Konstanz - Department of Economics
University of Lugano - Institute of Finance; Swiss Finance Institute
October 17, 2013
Regulatory sanctions and lawsuits related to Libor manipulation represent major operational risks facing large international banks. We find a significant relation between a bank’s measure of Libor exposure and its average monthly submission, from which Libor is subsequently computed, during 1999 to 2012. The relation is stronger during the January 2005 to May 2009 manipulation period (as per Barclays settlement), for currencies and maturities with substantial notional amounts of interest rate derivatives outstanding, and for banks that have settled Libor related lawsuits. We estimate that such manipulation could have increased the market value of the panel banks by $22.76 billion.
Number of Pages in PDF File: 53
Keywords: Libor, scandal, manipulation, factor models, operational risk
JEL Classification: G11, G12, G13working papers series
Date posted: October 18, 2013
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo7 in 0.406 seconds