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Improving Overnight Loan Identification in Payments Systems

Mark Rempel ()

Staff Working Papers from Bank of Canada

Abstract: Information on the allocation and pricing of over-the-counter (OTC) markets is scarce. Furfine (1999) pioneered an algorithm that provides transaction-level data on the OTC interbank lending market. The veracity of the data identified, however, is not well established. Using permutation methods, I estimate an upper bound on the daily false positive rate of this algorithm to be slightly above 10%. I propose refinements that reduce the bound below 10% with negligible power loss. The results suggest that the inferred prices and quantities of overnight loans do provide viable estimates of interbank lending market activity.

Keywords: Econometric and statistical methods; Financial markets; Interest rates; Payment clearing and settlement systems (search for similar items in EconPapers)
JEL-codes: C38 C53 E42 E44 G10 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2014
New Economics Papers: this item is included in nep-ban and nep-mac
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Journal Article: Improving Overnight Loan Identification in Payments Systems (2016) Downloads
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