Funds Transfer Pricing, Liquidity Premium and Market Structure
14 Pages Posted: 7 Jul 2017 Last revised: 2 Dec 2017
Date Written: July 3, 2017
Funds transfer pricing (FTP) is widely acknowledged as an important part of banks’ asset and liability management (ALM). This paper makes two contributions to the existing FTP-theory. First, we analyze the implications of adding a liquidity premium to the FTP. Second, since a majority of the existing banking markets are dominated by a limited number of large banks we also cover the case of kinked demand and supply curves on oligopolistic and oligopsonistic competition, respectively.
Keywords: Funds Transfer Pricing, FTP, Oligopoly, Oligopsony, Banks
JEL Classification: D4, L1
Suggested Citation: Suggested Citation