Discussion of Acharya and Skeie: A model of liquidity hoarding and term premia in inter-bank markets

摘要

In the last 3 years, we have seen a flurry of research papers documenting and trying to explain events in the interbank market during the crisis of 2007-2009. On August 9th, 2007 something striking happened with the pricing of interbank term loans (most noteworthy at the 1 and 3-month maturities): the interest rate charged for those loans "jumped" abruptly. A common representation of this phenomenon is the plot of the time series for the Libor-OIS spread, as presented in Fig. 1 of Acharya and Skeie's paper. The price of term loans remained high (and volatile) after the initial jump and, in September 2008, it jumped again to truly extreme levels. The volatility of interest rates in the US overnight interbank market also increased significantly during the period and there were numerous reports at the time that the market was working under extreme strain. One possible explanation for these events is that counterparty credit risk increased significantly for a subset of the participants in this market, and hence, the observed interest rates reflected a higher risk premium (Taylor and Williams, 2009). Transactions in the interbank market for loans are conducted over-the-counter and the reported interest rate is an average of a sample of relevant quotes for a given period of time. If some of the transactions involve borrowers with a significant credit risk, then the higher interest rates charged in those transactions will tend to increase the average. Under this view, the term interbank market for loans functioned fairly well during the crisis, correctly pricing the repayment risk associated with realized transactions at each time.