A mechanism for LIBOR

Coulter, Brian and Shapiro, Joel (2015) A mechanism for LIBOR. Working Paper.

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Abstract

The investigations into LIBOR have highlighted that it is subject to manipulation. We propose a mechanism that gets banks to reveal their borrowing costs truthfully at no cost to the administrator. The mechanism works even when borrowing does not occur. First, banks report the rates at which they can borrow. Second, a whistleblower bank may contest another bank's report by revealing a transaction or stating a different rate at which the reporting bank could borrow. Third, the whistleblower's claim and the initial reported rate are confirmed or denied by the willingness of other banks to lend at these rates.

Item Type: Other Working Paper
Keywords: LIBOR, mechanism design, finance
Subject(s): Finance
Related URLs:
Date Deposited: 25 Sep 2015 15:06
Last Modified: 24 Feb 2017 14:41
Funders: not applicable
URI: http://eureka.sbs.ox.ac.uk/id/eprint/5519

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