BIS Symposium: CIP - RIP?

22 May 2017
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The BIS organised a workshop on covered interest parity in Basel on 22 and 23 May 2017. The one and half day symposium brought together a small group of academics, central bankers and market practitioners with expertise on the subject. The goal was to understand the extent of deviations of forward exchange rates from interest rate differentials, at both short and long maturities, and their drivers. What are the deviations telling us about the functioning of international finance?


Monday 22 May 2017

12:00-13:00

Buffet lunch

13:00-13:15

Jaime Caruana, Bank for International Settlements
Opening remarks

13:15-14:00

Richard Levich, New York University
"CIP then and now" (presentation)

14:00-16:00

Session 1: CIP and money and bond markets

Chair:

Hyun Song Shin, Bank for International Settlements

Presenting author:
Paper:

Adrien Verdelhan, Massachusetts Institute of Technology
"Deviations from covered interest parity" (with W Du and A Tepper) (presentation)

Presenting author:
Paper:

Gordon Liao, Harvard Business School
"Credit migration and covered interest rate parity" (presentation)

Discussants:

David Lando, Copenhagen Business School (presentation)
Eila Kreivi, European Investment Bank (presentation)
Teppei Nagano, Bank of Japan (presentation)

16:00-16:30

Coffee break

16:30-18:30

Session 2: The role of balance sheet constraints

Chair:

Andrea Maechler, Swiss National Bank

Presenting author:
Paper:

Nao Sudo, Bank of Japan
"Regulatory reforms and the dollar funding of global banks: evidence from the impact of monetary policy divergence" (joint with T Iida, T Kimura) (presentation)

Presenting author:
Paper:

Vlad Sushko, Bank for International Settlements
"The failure of covered interest parity: FX hedging demand and costly balance sheets" (with C Borio, R McCauley, and P McGuire) (presentation)

Discussants:

Angelo Ranaldo, University of St Gallen (presentation)
Fabiola Ravazzolo, Federal Reserve Bank of New York

19:30-21:00

Dinner

Dinner speaker

Guy Debelle, Reserve bank of Australia
"How I learned to stop worrying and love the basis"
 

Tuesday 23 May 2017

08:15-08:30

Morning coffee

08:30-10:30

Session 3: Money market frictions and limits to arbitrage

Chair:

Guy Debelle, Reserve Bank of Australia

Presenting author:
Paper:

Dagfinn Rime, BI Norwegian Business School
"Segmented money markets and covered interest parity arbitrage" (with A Schrimpf and O Syrstad) (presentation)

Presenting author:
Paper:

Gino Cenedese, Bank of England
"Limits to arbitrage in the foreign exchange market: evidence from FX trade repository data" (with P Della Corte and T Wang)

Discussants:

Suresh Sundaresan, Columbia Business School (presentation)
Matt Boge, Reserve Bank of Australia
Itay Tuchman, Citibank

10:30-10:45

Pascal Nicoloso, European Central Bank
"Developments in FX swap markets - Money market statistical reporting perspective" (presentation)

10:45-11:00

Coffee break

11:00-11:45

Darrell Duffie, Stanford University
"Dealer pricing distortions and the leverage ratio rule" (presentation) (additional paper)

12:00-13:15

Lunch

13:15-15:15

Session 4: Bank business models and dollar funding

Chair:

Claudio Borio, Bank for International Settlements

Presenting author:
Paper:

Victoria Ivashina, Harvard University
"Dollar funding and the lending behaviour of global banks" (with J Stein and D Scharfstein) (presentation)

Presenting author:
Paper:

Wenxin Du, Board of Governors of the Federal Reserve
"The dollar, bank leverage and the deviation from covered interest parity" (with S Avdjiev, C Koch and H S Shin) (presentation)

Discussants:

Andrea Buraschi, Imperial College London (presentation)
Farooq Akram, Central Bank of Norway (presentation)
Fabio Bassi, JP Morgan

15:15-15:30

Coffee break

15:30-17:00

Session 5: Panel discussion
Should the basis worry us? What, if anything, should we do about it?

Chair:

Claudio Borio, Bank for International Settlements

Panellists:

Andrea Maechler, Swiss National Bank (presentation)
Anna Nordstrom, Federal Reserve Bank of New York
Beatrice Devillon-Cohen, Société Générale
James Hassett, Barclays