Bank-intermediated arbitrage

Arbeitspapier

We argue that post-crisis bank regulation can explain large, persistent deviations from parity on basis trades requiring leverage. Documenting the financing cost and balance sheet impact on a broad array of basis trades for regulated institutions, we show that the implied return on equity on such trades is considerably lower under post-crisis regulation. In addition, although hedge funds would serve as natural alternative arbitrageurs, we document that funds reliant on leverage from a global systemically important bank suffer significant declines in assets and returns relative to unlevered funds. Thus, post-crisis regulation not only affects the targeted banks directly but also spills over to unregulated firms that rely on bank intermediation for their arbitrage strategies.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Staff Report ; No. 858

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Financial Crises ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors ; Financial Institutions and Services: Government Policy and Regulation
• Thema: bank regulation ; arbitrage ; hedge funds

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Boyarchenko, Nina ; Eisenbach, Thomas M. ; Gupta, Pooja ; Shachar, Or ; Van Tassel, Peter
• Ereignis: Veröffentlichung
• (wer): Federal Reserve Bank of New York
• (wo): New York, NY
• (wann): 2018

Weitere Informationen

• Handle: http://hdl.handle.net/10419/210710
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ