The Whys of the LOIS: Credit Skew and Funding Rates Volatility

Stéphane Crépey () and Raphael Douady ()
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Stéphane Crépey: LaMME - Laboratoire de Mathématiques et Modélisation d'Evry - INRA - Institut National de la Recherche Agronomique - UEVE - Université d'Évry-Val-d'Essonne - CNRS - Centre National de la Recherche Scientifique

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: Since the 2007 subprime crisis, OIS and Libor markets (Eonia and Euribor in the EUR market) diverged suddenly (See Fig.1 and 2). In this note we show how, by optimizing their lending between Libor and OIS markets, banks are led to apply a spread (LOIS) over the OIS rate when lending at Libor.

Keywords: Economy; Mathematical Analysis (search for similar items in EconPapers)
Date: 2013-05
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Citations: View citations in EconPapers (1)

Published in Bloomberg Brief / Risk, 2013, pp.6-7

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Working Paper: The Whys of the LOIS: Credit Skew and Funding Rates Volatility (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-01477891

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