A permutation Information Theory tour through different interest rate maturities: the Libor case

Aurelio Fernandez Bariviera, M. Belen Guercio, Lisana B. Martinez and Osvaldo A. Rosso

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Abstract: This paper analyzes Libor interest rates for seven different maturities and referred to operations in British Pounds, Euro, Swiss Francs and Japanese Yen, during the period years 2001 to 2015. The analysis is performed by means of two quantifiers derived from Information Theory: the permutation Shannon entropy and the permutation Fisher information measure. An anomalous behavior in the Libor is detected in all currencies except Euro during the years 2006--2012. The stochastic switch is more severe in 1, 2 and 3 months maturities. Given the special mechanism of Libor setting, we conjecture that the behavior could have been produced by the manipulation that was uncovered by financial authorities. We argue that our methodology is pertinent as a market overseeing instrument.

Date: 2015-09
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1509.00217

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