Euro money market trading during times of crisis

Arbeitspapier

This paper uses the order book for 2007 and 2008 of a key Euro area market maker in the unsecured money market to estimate a stylized pricing model which explicitly accounts for the over - the - counter structure and the unsecured nature of these transactions. The empirical results suggest that the market maker learns from order flow to update her beliefs about the fundamental value of the overnight rate, but this information aggregation via order flow was increasingly hampered as the crisis unfolded. In addition, order size was also used to infer the unobservable component of a counterparty's credit risk.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 2012

Classification and Topics

• Classification: Wirtschaft ; International Financial Markets ; Interest Rates: Determination, Term Structure, and Effects ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Subject: Euro money market ; financial crisis ; market microstructure ; pricing behavior

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fecht, Falko ; Reitz, Stefan
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/122310
• Last update: 10.03.2025, 11:42 AM CET