The Overnight Currency Swap Rates and ISE Overnight Repo Rates

Doruk Küçüksaraç and Ozgur Ozel

Journal of BRSA Banking and Financial Markets, 2013, vol. 7, issue 2, 37-53

Abstract: This empirical research explores the interaction between the overnight currency swap rates (Turkish lira rates) and BIST overnight repo rates. In this context, the derived no arbitrage condition reveals that the differential between the two rates is determined by Libor, financial institutions’ foreign currency borrowing spread, required reserves on both Turkish lira and foreign currency. The empirical tests examine the long run relation between these two rates by using the cointegration method offered by Pesaran, Shin and Smith (PSS, 2001). Accordingly, empirical results confirm that the long run relation between these markets is consistent with the derived no arbitrage condition

Keywords: Currency Swap; Repo; No Arbitrage Condition; Cointegration; Error Correction Model. (search for similar items in EconPapers)
JEL-codes: C22 C58 E43 G12 G13 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:bdd:journl:v:7:y:2013:i:2:p:37-53

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