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Bank-intermediated arbitrage
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| Authors and Corporations: | , , , , |
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| Other Authors: | Eisenbach, Thomas M. [Author] • Gupta, Pooja [Author] • Shachar, Or [Author] • Van Tassel, Peter [Author] |
| Type of Resource: | E-Book |
| Language: | English |
| published: | |
| Series: |
Federal Reserve Bank of New York: Staff reports ; no. 858 (June 2018)
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| Source: | Verbunddaten SWB Lizenzfreie Online-Ressourcen |
| Summary: | We argue that post-crisis bank regulation can explain large, persistent deviations from parity on basis trades requiring leverage. Documenting the financing cost and balance sheet impact on a broad array of basis trades for regulated institutions, we show that the implied return on equity on such trades is considerably lower under post-crisis regulation. In addition, although hedge funds would serve as natural alternative arbitrageurs, we document that funds reliant on leverage from a global systemically important bank suffer significant declines in assets and returns relative to unlevered funds. Thus, post-crisis regulation not only affects the targeted banks directly but also spills over to unregulated firms that rely on bank intermediation for their arbitrage strategies. |
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| Physical Description: | 1 Online-Ressource (circa 64 Seiten); Illustrationen |