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Full-Text Articles in Finance and Financial Management
Fenceposts Without A Fence, Katherine Di Lucido, Nicholas Kean Tabor, Jeffery Zhang
Fenceposts Without A Fence, Katherine Di Lucido, Nicholas Kean Tabor, Jeffery Zhang
Law & Economics Working Papers
Banking organizations in the United States have long been subject to two broad categories of regulatory requirements. The first is permissive: a “positive” grant of rights and privileges, typically via a charter for a corporate entity, to engage in the business of banking. The second is restrictive: a “negative” set of conditions on those rights and privileges, limiting conduct and imposing a program of oversight and enforcement, by which the holder of that charter must abide. Together, these requirements form a legal cordon, or “regulatory perimeter,” around the U.S. banking sector.
The regulatory perimeter figures prominently in several ongoing policy …
Learning To Manipulate A Financial Benchmark, Megan Shearer, Gabriel V. Rauterberg, Michael P. Wellman
Learning To Manipulate A Financial Benchmark, Megan Shearer, Gabriel V. Rauterberg, Michael P. Wellman
Law & Economics Working Papers
Financial benchmarks estimate market values or reference rates used in a wide variety of contexts, but are often calculated from data generated by parties who have incentives to manipulate these benchmarks. Since the London Interbank Offered Rate (LIBOR) scandal in 2011, market participants, scholars, and regulators have scrutinized financial benchmarks and the ability of traders to manipulate them.
We study the impact on market welfare of manipulating transaction-based benchmarks in a simulated market environment. Our market consists of a single benchmark manipulator with external holdings dependent on the benchmark, and numerous background traders unaffected by the benchmark. We explore two …