Arbitrage Capital of Global Banks

@article{Anderson2021ArbitrageCO,
  title={Arbitrage Capital of Global Banks},
  author={Alyssa G. Anderson and Wenxin Du and Bernd Schlusche},
  journal={National Bureau of Economic Research},
  year={2021}
}
We show that the role of unsecured, short-term wholesale funding for global banks has changed significantly in the post-financial-crisis regulatory environment. Global banks mainly use such funding to finance liquid, near risk-free arbitrage positions—in particular, the interest on excess reserves arbitrage and the covered interest rate parity arbitrage. In this environment, we examine the response of global banks to a large negative wholesale funding shock as a result of the U.S. money market… 
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