A Sampling-Window Approach to Transactions-Based Libor Fixing

21 Pages Posted: 5 Feb 2013

See all articles by Darrell Duffie

Darrell Duffie

Stanford University - Graduate School of Business; National Bureau of Economic Research (NBER)

David R. Skeie

University of Warwick - Warwick Business School

James I. Vickery

Federal Reserve Bank of New York

Date Written: February 1, 2013

Abstract

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.

Keywords: Libor, interbank, transactions-based fixing, sampling window, shadow banking, financial intermediation

JEL Classification: G01, G10, G18, G28

Suggested Citation

Duffie, James Darrell and Skeie, David R. and Vickery, James Ian, A Sampling-Window Approach to Transactions-Based Libor Fixing (February 1, 2013). FRB of New York Staff Report No. 596, Available at SSRN: https://ssrn.com/abstract=2212182 or http://dx.doi.org/10.2139/ssrn.2212182

James Darrell Duffie

Stanford University - Graduate School of Business ( email )

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National Bureau of Economic Research (NBER)

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David R. Skeie (Contact Author)

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

HOME PAGE: http://www.wbs.ac.uk/about/person/david-skeie

James Ian Vickery

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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