Limits to arbitrage during the crisis: funding liquidity constraints and covered interest parity

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Subfields: Finance

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Covered interest parity lost: understanding the cross-currency basis (2016, methodology): “These episodes included the Japanese banking crisis (the “Japan premium”, Hanajiri (1999)); the onset of the GFC in 2007–08 (eg Baba et al (2008), Baba and Packer (2009), Coffey et al (2009), Mancini-Griffoli and Ranaldo (2012), Levich (2012)); and the euro area sovereign debt crisis in 2011–12 (McC”
Understanding FX Liquidity (2015, background): “Prior empirical research shows that FX liquidity and measures of funding conditions help explain currency (excess) returns (Christiansen, Ranaldo, and Söderlind 2011; Banti, Phylaktis, and Sarno 2012; Mancini, Ranaldo, and Wrampelmeyer 2013) and deviations from covered interest rate parity (Mancini-”
Deviations from Covered Interest Rate Parity (2018, unknown): “…during the global financial crisis and the European debt crisis (see, e.g., Baba, Packer, and Nagano, 2008; Baba, McCauley, and Ramaswamy, 2009; Coffey, Hrung, and Sarkar, 2009; Griffolli and Ranaldo, 2011; Bottazzi, Luque, Pascoa, and Sundaresan, 2012; and Ivashina, Scharfstein, and Stein, 2015).”