Currency Mispricing and Dealer Balance Sheets

• 成果类型: Article
• 署名作者: Cenedese, Gino; Della Corte, Pasquale; Wang, Tianyu
• 署名单位: Imperial College London; Centre for Economic Policy Research - UK; Bank of England; Tsinghua University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13079
• 发表日期: 2021
• 页码: 2763-2803
• 关键词: COVERED INTEREST ARBITRAGE; liquidity; cluster

摘要

We find dealer-level evidence that recent regulation on the leverage ratio requirement causes deviations from covered interest parity. Our analysis uses a unique data set of currency derivatives with disclosed counterparty identities together with exogenous variation introduced by the U.K. leverage ratio framework. Dealers who are affected by the regulatory shock charge an additional premium of about 20 basis points per annum for synthetic dollar funding relative to unaffected dealers. This finding holds even after controlling for changes in clients' demand. Also, some clients increase their trading activity with unaffected dealers with whom they already had a preexisting relationship.