Questions tagged [central-banking]
The central-banking tag has no usage guidance.
32 questions
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Deriving central bank hikes/cuts from a swap curve
Can you please explain the following? Please assume I am 5 years old.
how do you derive the cuts/hikes of the policy rate priced in a swap curve?
why you can derive the cuts/hikes only from a swap ...
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Market risk in Tier 1 capital of a bank
The common stock of the bank is considered to be a part of the Tier 1 capital, but it is also subject to market risk. The Investopedia definition distinguishes between Tier 1 and Tier 3 capital by the ...
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Predicting Bank of Canada Future Rate Changes Based on 3-month CORRA Futures [duplicate]
Earlier I asked a general question about how probabilities are derived from futures prices for derivatives related to the Bank of Canada's policy rate.
I have been advised the Overnight Index Swaps (...
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Estimating the relationship between short-term intretes rates and 10Y bond yields
On the 16th of March 2020, the Polish Central Bank announced its first-ever round of Quantitative Easing. I am conducting an event study on how this announcement impacted the term structure.
The main ...
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Pricing FX options on pegged currencies
I'm wondering what's the standard (if any) for practitioners to trade volatility on pegged currencies. Is there any specific convention? I'm thinking situations like EURCHF before the unpeg, how were ...
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Difference between US FED interest on reserve and EFFR?
Can anyone explain the difference between THE US Federal reserve interest on reserve balances (IRRBIOER) and effective fed funds rate (EFFR)?
IRRBIOER is currently at 0.9% and EFFR 0.83%. There seems ...
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Calculate core deposits in commercial bank
Given 10 years history of past balances of deposit accounts in a commercial bank, I need to calculate what part of those deposits were core, month by month.
This is my thinking: for each account/month ...
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How does the market derive market implied rates hike via swaps?
It is the story of interest at the moment. Rate hike expectations from central banks around the globe. Various sale side research parties publish often market implied rates hike. The magnitude and the ...
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The yield cure control effects on mortgages and car loans [closed]
The Brookings explaining the yield cure control writes:
Interest rate pegs theoretically should affect financial conditions and the economy in many of the same ways as traditional monetary policy: ...
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Japan benchmark rates
Can you please confirm on the following?
The difference between TONA (also called TONAR), JPY Libor, TIBOR is that:
JPY Libor, TIBOR are based on quotes from panel banks. The difference between them ...
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UK Government Debt Statistics
I would like to find some stats regarding UK Government debt. Any leads ?
I am looking for following questions
Debt / GBP ? ( Got it already )
Debt profile ( by maturity, instrument)
New debt ...
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Can banks use reserves to settle liabilities arising from cash-settled options trading?
Here is a hypothetical scenario: Bank A sells 1 SPX CALL/PUT to a retail trader who uses Bank B. The SPX becomes in the money. SPX is cash-settled. So Bank A transfers reserves held at Federal Reserve ...
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What drives the difference between M1 & M2 money supply (in the US)?
From what I understand the only entity that controls M1 in US is the Federal Reserve. Is it true that M2-M1( M2 minus M1; the part of M2 that is NOT in M1 like timed deposits) is controlled by the ...
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ECB - Two Tier System
It's said the theoretical aim of the ECB Two-tier system (exempt a portion of the excess reserves from negative rates) was designed to:
offset the direct costs of negative interest rates on banks, ...
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Why do banks tend to decrease lending rates, when central banks cut rates? [closed]
I am not clear of why banks could not leave lending rates unchanged following a rate cut from the central bank so to increase their interest rate margin and instead tend to lower their lending rates.
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What are eligible liabilities?
Under Basel III, the minimum capital adequacy ratio that banks must maintain is 8 percent. However, in order to an effective resolution the bank muss hold not only to its capital, but also eligible ...
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The impact of QE measures on capital
ECB/FEB and other central banks engage in various programs of quantitative easing. Of course, there is program-to-program variation in terms of details, the essence, however, is to buy dodgy ...
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Would FFR fall if the Fed set IOER to 0?
Even though we're currently in a corridor system and not a floor system (since FFR > IOER), if Interest On Excess Reserves were set to 0, wouldn't that cause the Federal Funds Rate to drop ...
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Why repo rate above federal funds rate while appears less credit risk
I think this will be an easy question for practitioners but going through several websites & papers is causing more confusion than anything else. So here goes: The effective federal funds rate is ...
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How would you use FRAs to find out how much Central Banks would cut/hike by?
Let's say you have The FRAs 1x4F, 2x5F, 3x6F, 4x7F, 5x8F... (meaning 3 months rate today, 3 months rate in 1 month, etc..) at 5.5, 5.5, 5.6, 5.55, 5.55.
Assume today's date is 20/09/2019.
You also ...
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Why does change in Sight Deposits reflect Swiss National Bank FX action
I am confused of how the Swiss National Bank's famous FX interventions are reflected in the change in Sight Deposits.
Against the backdrop of the ECB meeting, it is said that the SNB has taken ...
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Can a bond be denominated in another security?
Could a bond be issued that's denominated in securities like ETF shares or stock shares? Of course most people would not want to buy it, but is it possible? I know it's possible to short a security, ...
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Does banks' profitability really suffer under low interest rates
It is always said that European banks suffer, amongst other things, from the low interest rate environment governing the Eurozone. And that in a rising interest rate environment, banks' profitability ...
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List of European banks by assets and/or deposits
Does anyone know where I can find a list of European commercial banks that includes assets and/or deposits?
I found this link on ECB's website:
https://www.ecb.europa.eu/stats/financial_corporations/...
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Why is there a need for Libor in the UK
In the US, the Fed determines the federal funds rate, which is used by banks to lend money to each other.
In the UK, I am assuming the Central Bank has the same role.
So why then is there a need for ...
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Does the FED lend directly to commercial&investment banks or is there an intermediary
I has looking at this video on how interest rates are set. When the process of borrowing from the FED to commercial banks is explained, another entity is described(around 00:40).
So when the FED ...
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4
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Why wouldn't quantitative easing work if interest rates approach 0
I was reading this article on quantitative easing. At some point, this is mentioned, referring to QE:
This strategy loses effectiveness when interest rates approach zero, at which point banks have to ...
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3
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How can quantitative easing lower interest rates
I was reading about quantitative easing here, where the definition goes like this:
Quantitative easing is an unconventional monetary policy in which a central bank purchases government securities or ...
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What is a central bank's shadow rate
I was reading a WSJ article about the European Central Bank shadow rate, which is -5.1% at the moment.
The article says about the shadow rate that "Calculated with the rates on longer-dated credit ...
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A libor curve VS A 3-month or 6-month libor curve
I'm very confused about the terms regarding libor curves in general.
When people talk about libor curve, I picture it as a curve with different libor maturities (i.e. 1 week, 1 month, 3-month and 6-...
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Why can't/doesn't the Fed adjust the federal funds interest rate continuously?
Maybe the question I'm asking doesn't make sense-- but this is something I've wondered about since I learned about the Fed in high school.
The media typically talks about Fed interest rate changes as ...
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Trading a planned drop of FX peg
I've been playing around with ideas (not primarily to make money) about what exactly is going to happen when Czech National Bank will leave the EUR\CZK peg? It's been on for roughly 2.5 yrs as a ...
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