Sporadic manipulation in money markets with central bank standing facilities
In certain market environments, a large investor may benefit from building up a futures position first and trading subsequently in the spot market (Kumar and Seppi, 1992). The present paper identifies a variation of this type of manipulation that might occur in money markets with an interest rate corridor. We show that manipulation involving the use of central bank facilities would be observable only sporadically. The probability of manipulation decreases when the central bank uses an active liquidity management. Manipulation can also be reduced by widening the interest rate corridor. JEL Classification: D84, E52
|Date of creation:||Oct 2004|
|Date of revision:|
|Contact details of provider:|| Postal: 60640 Frankfurt am Main, Germany|
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/
More information through EDIRC
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.:
- Kumar, Praveen & Seppi, Duane J, 1992. " Futures Manipulation with "Cash Settlement."," Journal of Finance, American Finance Association, vol. 47(4), pages 1485-502, September.
- Roland Benabou & Guy Laroque, 1992.
"Using Privileged Information to Manipulate Markets: Insiders, Gurus, and Credibility,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 107(3), pages 921-958.
- Benabou, R. & Laroque, G., 1988. "Using Privileged Information To Manipulate Markets: Insiders, Gurus And Credibility," Papers 19, Princeton, Woodrow Wilson School - Discussion Paper.
- Benabou, R. & Laroque, G., 1989. "Using Privileged Information To Manipulate Markets: Insiders, Gurus, And Credibility," Working papers 513, Massachusetts Institute of Technology (MIT), Department of Economics.
- Furfine, Craig, 2001. "The reluctance to borrow from the Fed," Economics Letters, Elsevier, vol. 72(2), pages 209-213, August.
- Quiros, Gabriel Perez & Mendizabal, Hugo Rodriguez, 2006.
"The Daily Market for Funds in Europe: What Has Changed with the EMU?,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 38(1), pages 91-118, February.
- Gabriel Pérez-Quirós & Hugo Rodríguez Mendizábal, 2003. "The Daily Market for Funds in Europe: What has Changed with the EMU?," Working Papers 22, Barcelona Graduate School of Economics.
- Gabriel Pérez Quirós & Hugo Rodríguez Mendizábal, 2003. "The daily market for funds in Europe: what has changed with the EMU," Working Papers 0313, Banco de España;Working Papers Homepage.
- Gabriel Pérez Quirós & Hugo Rodríguez Mendizábal, 2003. "The Daily Market for Funds in Europe: What Has Changed with the EMU?," UFAE and IAE Working Papers 559.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Vila, Jean-Luc, 1989. "Simple games of market manipulation," Economics Letters, Elsevier, vol. 29(1), pages 21-26.
- Bagnoli, M. & Lipman, B., 1989.
"Stock Price Manipulation Through Takeover Bids,"
90-09, Michigan - Center for Research on Economic & Social Theory.
- Allen, Franklin & Gale, Douglas, 1992. "Stock-Price Manipulation," Review of Financial Studies, Society for Financial Studies, vol. 5(3), pages 503-29.
When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20040399. 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: (Official Publications)
If references are entirely missing, you can add them using this form.