En model for usikret interbank likviditet og anvendelse p a det europ iske interbank marked

Theis Ingerslev

Studenteropgave: Kandidatafhandlinger


The nancial crisis that arose in 2007 clearly emphasized the importance of the money markets and how essential they are for the rest of the nancial markets to operate orderly. The price of obtaining liquidity in the unsecured money markets developed explosively compared to the price of liquidity in the secured markets. So far analyses have been limited to plotting price spreads and qualitative attempts to measure banks' risk aversion. This thesis aims to take the analysis an academic step further. This study presents a liquidity model which will enable banks to lend unsecured liquidity to one another. The model depends on conditions regarding consumers' utility, stochastics in banks' individual liquidity need, distribution of asset returns and banks' gain on their customers. The model is not directly related to previous studies but it bene- ts greatly from the results found in earlier articles. The liquidity model creates a market for unsecured liquidity lending without asymmetric information and nancial contagion. A pattern of liquidity shock corresponding to those used in most recent studies is incorporated. The pattern combines both an aggregated and an individual (idiosyncratic) shock. It is examined and quanti ed how banks trade liquidity in the model. It is found that their trade can be limited by lack of surplus liquidity or by lack of pro t on trading liquidity. The market is under full competition. This determines the price of unsecured liquidity and drives the expected pro t on the most risk-prone liquidity lender to zero. It is shown how the banks' allocation of liquidity should be regulated in the liquidity model to achieve the highest average utility for the consumers. Overall it succeeds to establish mathematical expressions specifying the price of liquidity given the model's dependencies. The European money markets are examined. The framework is described: From obtaining liquidity in the European Central Bank to liquidity trading and transformation in the secondary market between private banks. The main money market indices are presented. Further more the assumptions of the liquidity model are related to the real European money market. The assumptions are found to be quite realistic but the exact precision of the regulation is questioned. The liquidity model is applied to the European money market and it is estimated how it re ects upon the recent developments within the market. The return of the asset seems to be of great importance. The rst rise in the price level of the unsecured liquidity in 2007 can be re ected by falling average return of the assets, though failing to justify the most drastic price rises. The most elevated price levels are reproduced in the liquidity model by a slip in the volatility of the asset returns or the consumers' discount of future consumption. If the explosive price development from 2008 is anchored to consumers' discount it clearly requires poor regulation of the banks' liquidity allocation. The rest of the dependencies in the model are found too weak to fully explain the development experienced within the money markets.

UddannelserCand.merc.mat Erhvervsøkonomi og Matematik, (Kandidatuddannelse) Afsluttende afhandling
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