Funding Liquidity Risk and Deviations from Interest-Rate Parity During the Financial Crisis of 2007-2009

Preprint OPEN
Cho-Hoi Hui; Hans Genberg; Tsz-Kin Chung;
(2009)
  • Subject: Sub-prime crisis, funding liquidity, covered interest parity, FX swaps
    • jel: jel:F31 | jel:F32 | jel:F33

Significant deviations from covered interest parity were observed during the financial crisis of 2007-2009. This paper finds that before the failure of Lehman Brothers the market-wide funding liquidity risk was the main determinant of these deviations in terms of the pr... View more
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