Research Discussion Paper – RDP 2019-09 Australian Money Market Divergence: Arbitrage Opportunity or Illusion?
Belinda Cheung and Sebastien Printant
September 2019
Contents
- Introduction
- Estimating Funding Costs, Gross Returns and Net Returns
- Estimation Results
- Sensitivity Analysis
- Leverage, Profitability and the Consequences for Money Markets
- Opportunity Cost of Money Market Lending
- Conclusion
- Appendix A: Data Summary
- References
The paper has benefited from initial conceptual discussions with Chris Becker and was further developed in a series of internal Reserve Bank seminars. We also thank Andrew Alexandratos, Samuel Chui, Anthony Coleman and Justin Wang from the Australian Prudential Regulation Authority for their insights and useful advice on the application of regulatory aspects in this paper. The views expressed in this paper are our own and do not necessarily reflect those of the Reserve Bank of Australia or the Australian Prudential Regulation Authority. Any remaining errors are our own.