A Yen is not a Yen: TIBOR/LIBOR and the determinants of the 'Japan Premium'
Pricing in the Euroyen market is based on LIBOR, the London Interbank Offer Rate, set at 11am London time or TIBOR, the Tokyo Interbank Offer Rate, set at 11am Tokyo time. Since the TIBOR panel is dominated by Tokyo city banks while the LIBOR panel is dominated by non-Japanese banks, the changing TIBOR-LIBOR spread reflects the credit risk associated with Japanese banks or the 'Japan premium.' In this paper, we investigate the determinants of this 'Japan premium.' The spread is modeled as a function of determinants of bank default and firm value suggested by a theory of credit spreads. Our results suggest that systematic variation in the spread can be explained by interest rate and stock price effects along with public information flows of good and bad news regarding Japanese banking, with a separate individual role for Japanese bank credit downgrades and upgrades.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (480) 965-5514
Fax: (480) 965-0748
Web page: http://repec.wpcarey.asu.edu/RePEc/asu/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:asu:wpaper:2133360. 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: (Steve Salik)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.