Structural distortions in the Euro interbank market: The role of 'key players' during the recent market turmoil
We study the frictions in the patterns of trades in the Euro money market. We characterize the structure of lending relations during the period of recent financial turmoil. We use network-topology method on data from overnight transactions in the Electronic Market for Interbank Deposits (e-Mid) to investigate on two main issues. First, we characterize the division of roles between borrowers and lenders in long-run relations by providing evidence on network formation at a yearly frequency. Second, we identify the 'key players' in the marketplace and study their behaviour. Key players are 'locally-central banks' within a network that lend (or borrow) large volumes to (from) several counterparties, while borrowing (or lending) small volumes from (to) a small number of institutions. Our results are twofold. We show that the aggregate trading patterns in e-Mid are characterized by largely asymmetric relations. This implies a clear division of roles between lenders and borrowers. Second, the key players do not exploit their position of network leaders by imposing opportunistic pricing policies. We find that only a fraction of the networks composed by big players are characterized by interest rates that are statistically different from the average market rate throughout the turmoil period.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ozsoylev, Han N. & Walden, Johan, 2011. "Asset pricing in large information networks," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2252-2280.
- Julien Idier & Stefano Nardelli, 2011. "Probability of informed trading on the euro overnight market rate," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 16(2), pages 131-145, 04.
- Zagaglia, Paolo, 2010.
"Informed trading in the Euro money market for term lending,"
20415, University Library of Munich, Germany.
- Paolo Zagaglia, 2010. "Informed Trading in the Euro Money Market for Term Lending," Working Paper Series 02_10, The Rimini Centre for Economic Analysis.
- Soramäki, Kimmo & Bech, Morten L. & Arnold, Jeffrey & Glass, Robert J. & Beyeler, Walter E., 2007.
"The topology of interbank payment flows,"
Physica A: Statistical Mechanics and its Applications,
Elsevier, vol. 379(1), pages 317-333.
- Marie Hoerova & Cornelia Holthausen & Florian Heider, 2009.
"Liquidity hoarding and interbank market spreads: the role of counterparty risk,"
2009 Meeting Papers
929, Society for Economic Dynamics.
- Heider, Florian & Hoerova, Marie & Holthausen, Cornelia, 2009. "Liquidity hoarding and interbank market spreads: the role of counterparty risk," Working Paper Series 1126, European Central Bank.
- Heider, F. & Hoerova, M. & Holthausen, C., 2009. "Liquidity Hoarding and Interbank Market Spreads : The Role of Counterparty Risk," Discussion Paper 2009-40 S, Tilburg University, Center for Economic Research.
- Heider, Florian & Hoerova, Marie & Holthausen, Cornelia, 2010. "Liquidity Hoarding and Interbank Market Spreads: The Role of Counterparty Risk," CEPR Discussion Papers 7762, C.E.P.R. Discussion Papers.
- Idier, Julien & Nardelli, Stefano, 2008. "Probability of informed trading on the euro overnight market rate: an update," Working Paper Series 0987, European Central Bank.
- Bech, Morten L. & Atalay, Enghin, 2008.
"The topology of the federal funds market,"
Working Paper Series
0986, European Central Bank.
- Bech, Morten L. & Atalay, Enghin, 2010. "The topology of the federal funds market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(22), pages 5223-5246.
- Iori, G. & Masi, G. D. & Precup, O. V. & Gabbi, G. & Caldarelli, G., 2005.
"A network analysis of the Italian oversight money market,"
05/05, Department of Economics, City University London.
- Iori, Giulia & De Masi, Giulia & Precup, Ovidiu Vasile & Gabbi, Giampaolo & Caldarelli, Guido, 2008. "A network analysis of the Italian overnight money market," Journal of Economic Dynamics and Control, Elsevier, vol. 32(1), pages 259-278, January.
- de Masi, G. & Iori, G. & Caldarelli, G., 2006.
"A fitness model for the Italian interbank money market,"
06/08, Department of Economics, City University London.
- G. De Masi & G. Iori & G. Caldarelli, 2006. "A fitness model for the Italian Interbank Money Market," Papers physics/0610108, arXiv.org.
- repec:dgr:uvatin:20060093 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:arx:papers:1207.5269. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators)
If references are entirely missing, you can add them using this form.