The Manipulation Potential of Libor and Euribor

44 Pages Posted: 2 Oct 2017

See all articles by Alexander Eisl

Alexander Eisl

Vienna University of Economics and Business - Institute for Finance, Banking and Insurance; Vienna University of Economics and Business

Rainer Jankowitsch

WU (Vienna University of Economics and Business); Vienna Graduate School of Finance (VGSF)

Marti G. Subrahmanyam

New York University (NYU) - Leonard N. Stern School of Business

Date Written: September 2017

Abstract

The London Interbank Offered Rate (Libor) and the Euro Interbank Offered Rate (Euribor) are two key benchmark interest rates used in a plethora of financial contracts. The integrity of the rate‐setting processes has been under intense scrutiny since 2007. We analyse Libor and Euribor submissions by the individual banks and shed light on the underlying manipulation potential for the actual and several alternative rate‐setting procedures. We find that such alternative fixings could significantly reduce the effect of manipulation. We also explore related issues such as the sample size and the particular questions asked of the banks in the rate‐setting process.

Keywords: money markets, Libor, Euribor, manipulation, collusion

Suggested Citation

Eisl, Alexander and Eisl, Alexander and Jankowitsch, Rainer and Subrahmanyam, Marti G., The Manipulation Potential of Libor and Euribor (September 2017). European Financial Management, Vol. 23, Issue 4, pp. 604-647, 2017, Available at SSRN: https://ssrn.com/abstract=3045566 or http://dx.doi.org/10.1111/eufm.12126

Alexander Eisl (Contact Author)

Vienna University of Economics and Business - Institute for Finance, Banking and Insurance ( email )

Heiligenstaedter Strasse 46-48
Vienna, 1190
Austria

Vienna University of Economics and Business ( email )

Heiligenstadter-Strasse 46-48
Vienna, Wien A-1190
Austria

Rainer Jankowitsch

WU (Vienna University of Economics and Business) ( email )

Welthandelsplatz 1
Vienna, Vienna AT1020
Austria
+43 1 31 336 4340 (Phone)
+43 1 310 0580 (Fax)

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Marti G. Subrahmanyam

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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