Cheap Talk and Strategic Rounding in Libor Submissions
(2019)
Journal Article
Hernando-Veciana, A., & Tröge, M. (2020). Cheap Talk and Strategic Rounding in Libor Submissions. The Review of Financial Studies, 33(6), 2585-2621. https://doi.org/10.1093/rfs/hhz101
Interbanking rates were, until recently, based on judgmental estimates of borrowing costs. We interpret this as a cheap-talk game that allowed banks to communicate nonverifiable information about their opportunity cost to potential counterparties. Un... Read More about Cheap Talk and Strategic Rounding in Libor Submissions.