New Economics Papers
on Financial Markets
Issue of 2010‒08‒21
two papers chosen by

  1. Moment Explosion in the LIBOR Market Model By Stefan Gerhold
  2. Deposit Market Competition, Wholesale Funding, and Bank Risk By Craig, B.R.; Dinger, V.

  1. By: Stefan Gerhold
    Abstract: In the LIBOR market model, forward interest rates are log-normal under their respective forward measures. This note shows that their distributions under the other forward measures of the tenor structure have approximately log-normal tails.
    Date: 2010–08
  2. By: Craig, B.R.; Dinger, V. (Tilburg University, Center for Economic Research)
    Abstract: In this paper we revisit the long debate on the risk effects of bank competition and propose a new approach to the empirical estimation of the relation between deposit market competition and bank risk. Our approach accounts for the opportunity of banks to shift to wholesale funding when deposit market competition is intense. The analysis is based on a unique comprehensive dataset which combines retail deposit rates data with data on bank characteristics and with data on local deposit market features for a sample of 589 U.S. banks. Our results support the notion of a risk-enhancing effect of deposit market competition.
    Keywords: bank competition;wholesale funding;bank risk;deposit rates
    JEL: G21
    Date: 2010

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