The Fellowship of LIBOR: A Study of Interbank Correlations by the Method of Wigner-Ville Function

Abstract

The method of the Wigner-Ville function proposed by Wigner, (1932) and Ville (1947) is widely used in quantum statistical mechanics and signal processing and historically preceded the continuous-time wavelets. (Gabor, 1946) Here it is proposed for the studies of the financial time series. One of the advantages of the Wigner-Ville function is the possibility to easily visualize the results and use image analysis software to analyze the time series, especially pertinent in the modern era of “big data.” In the current paper, we use the Wigner-Ville function for the “toy” problem of the suspected manipulation of the LIBOR quotes by the member banks.

Keywords: LIBOR, Libor manipulation, Wigner-Ville Function, Financial econometrics

JEL Classification: C32, C45, C52, G14, G21