The Price of Risk at Year-End: Evidence from Interbank Lending

Craig Furfine
1999 Social Science Research Network  
Fax: +41 61 / 280 91 00 and +41 61 / 280 81 00 This publication is available on the BIS website (www.bis.org). © Bank for International Settlements 1999. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. Abstract This paper analyses Risk premia on overnight interbank loans increase by a factor of 13 at year-end. Further, this finding is not consistent with common theories of similar year-end anomalies in other money markets. In particular,
more » ... particular, seasonal liquidity demands seem to explain only a fraction of the effect. Although evidence of yearend window dressing is found in the interbank market, such activity cannot explain the change in pricing behaviour because information about the risk of interbank loans is never publicly disclosed. * The author would like to acknowledge helpful comments from James Hamilton and colleagues at the Bank for International Settlements.
doi:10.2139/ssrn.181668 fatcat:4vdtcg5dvrdgnnncfg5sn5jtvq