The effect of underreporting on LIBOR rates |
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Institution: | 1. Department of Economics, University of Nevada, Las Vegas, NV 89154-6005, United States\n;2. Department of Finance, University of Nevada, Las Vegas, NV 89154-6008, United States;3. Department of Economics, Queens College, CUNY, Flushing, New York, NY 11367-1597, United States\n |
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Abstract: | On May 29, 2008, the Wall Street Journal reported that several large international banks were reporting unjustifiably low LIBOR rates. Since then two large banks, Barclays and UBS, have paid significant fines for manipulating their LIBOR rates, and additional banks are expected to be fined. This paper investigates whether the underreporting of LIBOR rates by some banks significantly affected the reported LIBOR rate by testing whether there was a significant change in the relationship between the LIBOR rate and another rate that reflects the default risk of banks. |
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Keywords: | LIBOR rate Default risk Structural breaks |
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