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Arbitrage Capital of Global Banks / Alyssa G. Anderson, Wenxin Du, Bernd Schlusche.
- Format:
- Book
- Author/Creator:
- Anderson, Alyssa G.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w28658.
- NBER working paper series no. w28658
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2021.
- Summary:
- We show that the role of unsecured, short-term wholesale funding for global banks has changed significantly in the post-financial-crisis regulatory environment. Global banks mainly use such funding to finance liquid, near risk-free arbitrage positions--in particular, the interest on excess reserves arbitrage and the covered interest rate parity arbitrage. In this environment, we examine the response of global banks to a large negative wholesale funding shock as a result of the U.S. money market mutual fund reform implemented in 2016. In contrast to past episodes of wholesale funding dry-ups, we find that the primary response of global banks to the reform was a cutback in arbitrage positions that relied on unsecured funding, rather than a reduction in loan provision.
- Notes:
- Print version record
- April 2021.
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