Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152833
Authors: 
Ewerhart, Christian
Cassola, Nuno
Ejerskov, Steen
Valla, Natacha
Year of Publication: 
2004
Series/Report no.: 
ECB Working Paper 399
Abstract: 
In certain market environments, a large investor may benefit from building up a futures position first and trading subsequently in the spot market (Kumar and Seppi, 1992). The present paper identifies a variation of this type of manipulation that might occur in money markets with an interest rate corridor. We show that manipulation involving the use of central bank facilities would be observable only sporadically. The probability of manipulation decreases when the central bank uses an active liquidity management. Manipulation can also be reduced by widening the interest rate corridor.
Subjects: 
corridor system
manipulation
money market
JEL: 
D84
E52
Document Type: 
Working Paper

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