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The Detection of Euribor Manipulation in the European Interbank Market
University West, School of Business, Economics and IT, Divison of Law, Economics, Statistics and Politics.
University West, School of Business, Economics and IT, Divison of Law, Economics, Statistics and Politics.
2018 (English)Independent thesis Advanced level (degree of Master (Two Years)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

This paper investigates the possible Euribor manipulation of 23 European panel banks during the years 2005 to 2010. For this purpose, we will investigate two different methodologies. The first approach is a regression analysis which includes stationarity tests. We are expecting a significant break of the 3M Euribor rate with the outbreak of the financial crisis in August 2007. In a second approach we will run a test for variance equivalence between the two spreads, Euribor-OIS and CDS spread. The two spreads should have the same relative risk as their main component which should be reflected in homogeneous variances. By running a classical unit root test, we can detect a significant breakpoint in October 2008. This discrepancy could be a sign of panel banks submitting lower and thereby not trustworthy Euribor rates. This paper further investigates the breakpoint by testing for parameter stability by using the Chow test. Our conclusion is that a possible Euribor manipulation is detected during the crisis period. After running the Levene´s test for variance equivalence, the results indicate significantly different variances which can be a sign for Euribor manipulation. This strengthens the argument that banks may have incentives to manipulate their submitted Euribor rates to maintain their reputation and to improve their trading positions in the financial market. Banks pretend creditworthiness and can hide liquidity shortages by submitting lower Euribor rates.

Place, publisher, year, edition, pages
2018. , p. 29
Keywords [en]
Euribor, Panel Banks, Manipulation, Breakpoint, Levene’s Test
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:hv:diva-12648Local ID: EXF800OAI: oai:DiVA.org:hv-12648DiVA, id: diva2:1230589
Subject / course
Nationalekonomi
Educational program
Mäklarekonom
Supervisors
Examiners
Available from: 2018-07-05 Created: 2018-07-04 Last updated: 2018-07-05Bibliographically approved

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Citation style
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  • en-US
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