Are Banks Risk Averse? Intraday Timing of Operations in the Interbank Market

Abstract

The paper presents a simple theory of intraday behavior in the interbank market. The timing of borrowing and lending operations depends on the information available on two key variables: the end-of-day balance from the clearing system--the algebraic sum of incoming (+) and outgoing (-) daily payments--and the short-term interest rate. When the former is the relevant source of uncertainty, risk-averse banks should tend to operate close to the end of the business day, when the balance becomes observable. Conversely, when the interbank rate is relatively more volatile, operations should be shifted to the early morning, when the balance is not observable but the rate is. The theory is found to be consistent with banks' behavior in the Italian interbank market.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 149 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.