CAREER: Empirical Analysis of Financial Markets Using Auction Data

最近的金融危机强调了了解银行体系机制的重要性，特别是在参与银行之间分配流动性/短期资金的机制。许多金融市场都是以拍卖的形式组织起来的，本提案的目标是利用解释拍卖市场行为的经济理论，以探讨金融市场本身的机制。例如，银行间的许多交易都是在场外进行的，因此外人不会注意到。然而，由于银行经常参与与中央银行的各种交易，例如欧洲中央银行进行的贷款拍卖，我们可以在银行间市场面临的融资成本与其支付中央银行贷款的意愿之间建立联系。拍卖理论告诉我们，在给定的拍卖机制下，竞标者如何将他们的支付意愿转化为出价。因此，我们可以使用计量经济学技术，使我们能够做相反的事情：从观察到的出价中恢复支付意愿，从而收回每家银行的融资成本。该提案包括以下更详细描述的几个项目，这些项目利用这种方法来解决重要问题，如系统性风险的量化、用于在财务上结算信用违约掉期合同的机制的评估或对美国债务需求弹性的估计。在该项目的第一部分，PI建议通过使用欧洲中央银行（ECB）每周再融资拍卖（欧洲货币政策的主要工具）的投标来获取有关短期融资成本的信息。PI提出了一种新方法，利用这些融资成本的动态来了解金融网络（银行之间未被观察到的风险敞口），以量化系统性风险：对一家银行的负面冲击对其他银行融资成本的影响程度。因此，这项研究是对估计这一重要参数的平行努力的直接补充，监管机构对此非常感兴趣。该指数关注的是严重危机时期（2007- 2009年），包括2007年金融危机爆发和雷曼兄弟（Lehman Brothers）破产。利用欧洲央行主要再融资业务的报价，该项目将有助于我们对金融网络的理解，并将提供如何利用辅助数据揭示银行之间联系的方法，这些联系通常是由于银行间交易的场外交易性质而无法观察到的。该项目的第二部分侧重于在各种触发事件（如针对信用违约互换（CDS）的金融结算的违约）之后举行的拍卖。由于未偿CDS合约的数量大大超过担保债券的数量，目前采用的两阶段拍卖程序是一种非常重要的价格发现机制，允许在触发事件后对这些合约进行财务结算。然而，这种机制的奇怪特征可能会让人怀疑，参与者是否有正确的动机，以使债券的最终价格与其真实价值相对应。因此，拟议的项目将通过评估目前使用的两阶段机制的好处和不足，有助于我们了解这个重要的市场。这个项目的最后一部分关注的是财政部发行的美国国债。目标是通过直接从提交的投标中恢复对各种证券的支付意愿，来估计对不同期限的不同债务工具的需求弹性及其替代模式。这些结果应该有助于财政部指导其在给定一周内出售的到期债券组合的决定。本项目的第二个目标是分析一级经销商系统的成本和收益。更广泛的影响：拟议的研究有可能产生衡量单个银行财务健康状况的措施，并量化银行对整个系统的重要性，即其“系统性”。因此，使用提出的方法，我们可能能够正式识别“大到不能倒”的银行。银行，因此我们可以提高潜在政策干预的目标。对信用违约掉期拍卖的分析，应能在一定程度上揭示该机制在发现违约发行人债券正确价格方面的可靠性，并有可能指出其不足之处，并提出改进拍卖机制的建议。监管机构、央行和政策制定者应该对其结果感兴趣。研究结果将广泛传播，以促进有关机构的应用。

The recent financial crisis has underscored the importance of understanding the mechanics of the banking system and especially the mechanisms used to allocate liquidity/short-term funds among the participating banks. Many financial markets are organized as auctions and the goal of this proposal is to leverage the economic theory explaining behaviour in auction markets in order to speak to the mechanics of the financial markets themselves. For example, much of the transactions between banks takes place over-the-counter andis thus unobserved to outsiders. Nevertheless since banks participate frequently in various transactions with the central banks, such as auctions of loans conducted by the European Central Banks, we can construct a link between the cost of funding a bank faces in the interbank market and its willingness-to-pay for a loan from the central bank. The auction theory informs us how bidders would translate their willingness-to-pay into bids given an auction mechanism. We can therefore employ econometric techniques that allow us to dothe reverse: recover the willingness-to-pay from the observed bids and thus to recover the cost of funding of every bank. This proposal consists of several projects described in more detail below that make use of this approach to address important issues such as quantification of systemic risk, evaluation of the mechanism used to settle the credit default swap contracts financially or estimation of the elasticity of demand for US Debt.In the first part of this project the PI proposes to recover information about the cost of short-term funding by using bids from the European Central Banks (ECB) weekly refinancing auctions, the primary tool of European monetary policy. The PI proposes to a novel method that utilizes the dynamics of these funding costs to gain insights about the financial network (the unobserved exposures of banks to one another) in order to quantify the systemic risk: the extent to which a negative shock to one bank can affect the funding costs of other banks. This research is thus a direct complement to parallel efforts to estimate this important parameter, which regulators are very interested in. The PI focuses on the time of severe distress (2007-09), which includes the onset of the 2007 financial crisis and the failure of Lehman Brothers. Using bids from main refinancing operations of the ECB, the project will contribute to our understanding of financial networks and it will provide methods how to uncover the links between banks, which are typically unobserved due tothe over-the-counter nature of the interbank transactions, using auxiliary data. The second part of the project focuses on auctions held after various triggering events such as defaults that are aimed at financial settlement of credit default swaps (CDS). Since the amount of outstanding CDS contracts greatly exceeds the amount of covered bonds, the currently employed two-stage auction procedure is a very important price-discovery mechanism that allows for financial settlement of these contracts after a triggering event. Yet, the strange features of this mechanism may cast some doubt on whether the participants have the right incentives to behave in a way that the resulting price of the bond corresponds to its true value. The proposed project therefore will contribute to our understanding of this important market by evaluating the benefits and deficiencies of the two-stage mechanism that is currently used. The final part of this project focuses on the issuance of US Debt by the Department of Treasury. The goal is to estimate the elasticities of demand for different debt instruments of various maturities and their substitution patterns by recovering the willingness-to-pay for various securities directly from the submitted bids. These results should help the Treasury guide its decision on the mix of maturities that are sold in a given week. The secondary goal of this project is to analyze the costs and benefits of the primary dealersystem.Broader impact: The proposed research has the potential to generate measures of financial health of individual banks and quantify the importance of a bank for the whole system, i.e., its ?systemic-ness?. Using the proposed methods we thus may be able to formally identify the ?too-big-to-fail? banks, and hence we may improve targeting of potential policy interventions. The analysis of credit default swap auctions should shed some light on the reliability of that mechanism to discover the correct price of bonds of defaulted issuersand potentially point to its deficiencies and propose improvements to the auction mechanism. The results should be of interest to regulators, central banks and policy-makers. The results will be disseminated broadly to promote their application by the relevant institutions.