Overnight Interbank Loan Markets

51 Pages Posted: 23 Sep 2004

See all articles by Selva Demiralp

Selva Demiralp

Koc University - Department of Economics

Brian Preslopsky

Board of Governors of the Federal Reserve System

William C. Whitesell

Federal Reserve Board - Division of Monetary Affairs

Date Written: May 2004

Abstract

This paper investigates transactions and interest rates on brokered and direct trades in federal funds, Euro-dollar transactions, and repurchase agreements, all of which are used by banks in overnight funding. We expand on earlier work on calendar-day effects in these markets, investigating also volumes of funding in recent years. Our data include daily trades in federal funds reported by major brokers and also records of uncollateralized transactions over the wire transfer system operated by the Federal Reserve. We find that the share of the overnight interbank loan market represented by brokered fed funds has decreased and is now only about one-third of the total. We also show evidence of close but incomplete arbitrage among the major segments of the overnight interbank market, though the specific calendar-day patterns of spreads and volatilities have evolved relative to the literature using earlier sample periods.

Keywords: Federal funds, euro-dollar, repo, arbitrage

JEL Classification: E4, G1

Suggested Citation

Demiralp, Selva and Preslopsky, Brian and Whitesell, William C., Overnight Interbank Loan Markets (May 2004). Available at SSRN: https://ssrn.com/abstract=594021 or http://dx.doi.org/10.2139/ssrn.594021

Selva Demiralp (Contact Author)

Koc University - Department of Economics ( email )

Rumeli Feneri Yolu
Sariyer 80910 Istanbul
Turkey
+212 338 1842 (Phone)

Brian Preslopsky

Board of Governors of the Federal Reserve System

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

William C. Whitesell

Federal Reserve Board - Division of Monetary Affairs ( email )

20th and C Streets, NW
Mailstop 72
Washington, DC 20551
United States
202-452-2967 (Phone)
202-452-3819 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
206
Abstract Views
1,292
rank
175,633
PlumX Metrics