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Understanding liquidity and credit risks in the financial crisis.

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Understanding liquidity and credit risks in the financial crisis. / Gefang, Deborah; Koop, Gary; Potter, Simon M.

In: Journal of Empirical Finance, Vol. 18, No. 5, 12.2011, p. 903-914.

Research output: Contribution to journalJournal article

Harvard

Gefang, D, Koop, G & Potter, SM 2011, 'Understanding liquidity and credit risks in the financial crisis.', Journal of Empirical Finance, vol. 18, no. 5, pp. 903-914. https://doi.org/10.1016/j.jempfin.2011.07.006

APA

Gefang, D., Koop, G., & Potter, S. M. (2011). Understanding liquidity and credit risks in the financial crisis. Journal of Empirical Finance, 18(5), 903-914. https://doi.org/10.1016/j.jempfin.2011.07.006

Vancouver

Author

Gefang, Deborah ; Koop, Gary ; Potter, Simon M. / Understanding liquidity and credit risks in the financial crisis. In: Journal of Empirical Finance. 2011 ; Vol. 18, No. 5. pp. 903-914.

Bibtex

@article{ece6d2957b1b4a9ca0b45278649494db,
title = "Understanding liquidity and credit risks in the financial crisis.",
abstract = "This paper develops a structured dynamic factor model for the spreads between London Interbank Offered Rate (LIBOR) and overnight index swap (OIS) rates for a panel of banks. Our model involves latent factors which reflect liquidity and credit risk. Our empirical results show that surges in the short term LIBOR-OIS spreads during the 2007–2009 financial crisis were largely driven by liquidity risk. However, credit risk played a more significant role in the longer term (twelve-month) LIBOR-OIS spread. The liquidity risk factors are more volatile than the credit risk factor. Most of the familiar events in the financial crisis are linked more to movements in liquidity risk than credit risk.",
keywords = "Dynamic factor model, LIBOR-OIS spread , Credit default swap",
author = "Deborah Gefang and Gary Koop and Potter, {Simon M.}",
year = "2011",
month = "12",
doi = "10.1016/j.jempfin.2011.07.006",
language = "English",
volume = "18",
pages = "903--914",
journal = "Journal of Empirical Finance",
issn = "0927-5398",
publisher = "Elsevier",
number = "5",

}

RIS

TY - JOUR

T1 - Understanding liquidity and credit risks in the financial crisis.

AU - Gefang, Deborah

AU - Koop, Gary

AU - Potter, Simon M.

PY - 2011/12

Y1 - 2011/12

N2 - This paper develops a structured dynamic factor model for the spreads between London Interbank Offered Rate (LIBOR) and overnight index swap (OIS) rates for a panel of banks. Our model involves latent factors which reflect liquidity and credit risk. Our empirical results show that surges in the short term LIBOR-OIS spreads during the 2007–2009 financial crisis were largely driven by liquidity risk. However, credit risk played a more significant role in the longer term (twelve-month) LIBOR-OIS spread. The liquidity risk factors are more volatile than the credit risk factor. Most of the familiar events in the financial crisis are linked more to movements in liquidity risk than credit risk.

AB - This paper develops a structured dynamic factor model for the spreads between London Interbank Offered Rate (LIBOR) and overnight index swap (OIS) rates for a panel of banks. Our model involves latent factors which reflect liquidity and credit risk. Our empirical results show that surges in the short term LIBOR-OIS spreads during the 2007–2009 financial crisis were largely driven by liquidity risk. However, credit risk played a more significant role in the longer term (twelve-month) LIBOR-OIS spread. The liquidity risk factors are more volatile than the credit risk factor. Most of the familiar events in the financial crisis are linked more to movements in liquidity risk than credit risk.

KW - Dynamic factor model

KW - LIBOR-OIS spread

KW - Credit default swap

U2 - 10.1016/j.jempfin.2011.07.006

DO - 10.1016/j.jempfin.2011.07.006

M3 - Journal article

VL - 18

SP - 903

EP - 914

JO - Journal of Empirical Finance

JF - Journal of Empirical Finance

SN - 0927-5398

IS - 5

ER -