On days like to day, I wish I were a game theorist. The I could figure out what a Nash game would predict about LIBOR reporting, and how that would vary from honest reporting.
The rules of the game are well set out and mostly symmetric, although it is the mostly part that creates a problem. Suppose there are N reporters and the LIBOR that is produced is based on the interquartile mean of what is reported. Each bank is then seeking to maximize some objective function that depends on that interquartile mean, over which it has some influence. If all banks have the same objective function, then symmetry will mean they all choose the same rate, which is not particularly interesting.
But each individual bank is gets some draw from a distribution, that it turn determines its optimal play. This will produce heterogeneity in rates chosen. Alas, I am not good enough at math to go any further than that...
[update: found a paper that does the exercise here.]
The rules of the game are well set out and mostly symmetric, although it is the mostly part that creates a problem. Suppose there are N reporters and the LIBOR that is produced is based on the interquartile mean of what is reported. Each bank is then seeking to maximize some objective function that depends on that interquartile mean, over which it has some influence. If all banks have the same objective function, then symmetry will mean they all choose the same rate, which is not particularly interesting.
But each individual bank is gets some draw from a distribution, that it turn determines its optimal play. This will produce heterogeneity in rates chosen. Alas, I am not good enough at math to go any further than that...
[update: found a paper that does the exercise here.]
5 comments:
nice post
house in kathmandu
A property, especially when you buy a house for yourself, will be a fulfilling chance to learn. Actual property financial commitment will not take out all your efforts.
Mandrien Consulting Group
With Michigan Mortgage you need not to worry about Libor. Promise.
It can be described more roughly by the number of rooms. A studio apartment has a single bedroom with no living room (possibly a separate kitchen istanbul real estate).
A one-bedroom apartment has a living or dining room istanbul property separate from the bedroom. Two bedroom, three bedroom, and larger units are common.
(A bedroom is defined istanbul properties as a room with a closet for clothes storage.)
The size of an apartment or house can be istanbul property described in square feet or meters. In the United States, this istanbul real estate includes the area of "living space",
excluding the garage and other non-living spaces. The "square meters" figure of a house in Europe istanbul properties may report the total area of the walls enclosing the home,
thus including any attached garage and non-living spaces, which makes it important to inquire what kind of surface definition has been used.
In recent years, istanbul real estate many economists have recognized that the lack of
effective real estate laws can be a significant istanbul properties barrier to investment in
many developing countries. In most societies, rich and poor, a significant fraction of the total wealth is in the form of istanbul property land and buildings.
In most advanced economies, the main source of capital istanbul real estate used by
individuals and small companies to purchase and improve land and buildings is mortgage loans (or other instruments). These are loans for which the real property
itself constitutes collateral. Banks are willing to make such loans at favorable rates in large part because,
istanbul property if the borrower does not make payments, the lender can foreclose by
filing a court action which allows them to take back the property and sell it to get their money back. For investors, profitability can be enhanced by using an off
plan or pre-construction strategy to purchase at a lower price which is often the case in the pre-construction istanbul properties phase of development.
Post a Comment