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Uncollateralized Overnight Loans Settled in LVTS

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Author Info

  • Scott Hendry
  • Nadja Kamhi

Abstract

Loan-level data on the uncollateralized overnight loan market is generated using payment data from Canada's Large Value Transfer System (LVTS) and a modified version of the methodology proposed in Furfine (1999). There were on average just under 100 loans extended in this market each day from March 2004 to March 2006 for a total daily value of about $5 billion. This makes the market slightly larger than the brokered repo market but only about one-tenth of the estimate for the direct trade repo market. The implied uncollateralized overnight rate was found to be remarkably stable relative to other measures of the overnight rate. Loan rates are found to vary with market conditions, the size of the loan, and the type (big vs. small) of the borrower and lender.

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File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/03/wp07-11.pdf
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Bibliographic Info

Paper provided by Bank of Canada in its series Working Papers with number 07-11.

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Length: 25 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:bca:bocawp:07-11

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Keywords: Financial markets; Interest rates;

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References

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  1. Demiralp, Selva & Preslopsky, Brian & Whitesell, William, 2006. "Overnight interbank loan markets," Journal of Economics and Business, Elsevier, vol. 58(1), pages 67-83.
  2. Chris D'Souza, 2007. "Where Does Price Discovery Occur in FX Markets?," Working Papers 07-52, Bank of Canada.
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Cited by:
  1. Luca Arciero & Ronald Heijmans & Richard Heuver & Marco Massarenti & Cristina Picillo & Francesco Vacirca, 2013. "How to measure the unsecured money market? The Eurosystem's implementation and validation using TARGET2 data," DNB Working Papers 369, Netherlands Central Bank, Research Department.
  2. Leonardo Bartolini & Spence Hilton & James McAndrews, 2008. "Settlement delays in the money market," Staff Reports 319, Federal Reserve Bank of New York.
  3. Anna Kovner & David Skeie, 2013. "Evaluating the quality of fed funds lending estimates produced from Fedwire payments data," Staff Reports 629, Federal Reserve Bank of New York.
  4. Alejandra Anastasi & Pedro Elosegui & Máximo Sangiácomo, 2010. "Call Money Interest Rate Determinants in Argentina," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(57-58), pages 95-126, January -.
  5. Olivier Armantier & Adam Copeland, 2012. "Assessing the quality of “Furfine-based” algorithms," Staff Reports 575, Federal Reserve Bank of New York.

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