CAREER: Empirical Analysis of Financial Markets Using Auction Data

最近的金融危机突出表明，必须了解银行系统的机制，特别是用于在参与银行之间分配流动资金/短期资金的机制。许多金融市场是以拍卖的形式组织起来的，这项提议的目标是利用解释拍卖市场行为的经济学理论，向金融市场本身的机制说话。例如，银行之间的许多交易都是在场外进行的，因此不会被外人察觉。然而，由于银行经常参与与央行的各种交易，例如欧洲央行进行的贷款拍卖，我们可以在银行间市场上面临的融资成本与其从央行支付贷款的意愿之间建立联系。拍卖理论告诉我们，在给定拍卖机制的情况下，投标人将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。这一建议由几个项目组成，下面将更详细地描述这些项目，这些项目利用这种方法来解决一些重要问题，如系统风险的量化、用于在财务上结算信用违约互换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建议通过使用欧洲央行(ECB)每周再融资拍卖的投标来恢复有关短期融资成本的信息，欧洲央行是欧洲货币政策的主要工具。PI提出了一种新的方法，利用这些融资成本的动态来洞察金融网络(银行之间未被观察到的风险敞口)，以量化系统性风险：一家银行的负面冲击可能影响其他银行融资成本的程度。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。PI的重点是严重危机时期(2007-09年)，其中包括2007年金融危机的爆发和雷曼兄弟的倒闭。使用欧洲央行主要再融资业务的投标，该项目将有助于我们理解金融网络，并将提供如何使用辅助数据发现银行之间的联系的方法，由于银行间交易的场外交易性质，通常无法观察到这些联系。该项目的第二部分侧重于在各种触发事件后举行的拍卖，例如旨在对信用违约互换(CDS)进行财务结算的违约事件。由于未偿还CDS合约的数量远远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去采取一种方式，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，促进我们对这一重要市场的了解。该项目的最后部分重点是财政部发行美债的问题。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，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决定在给定的一周内出售的期限组合。这个项目的次要目标是分析一级交易商制度的成本和收益。更广泛的影响：拟议的研究有可能产生个别银行的财务健康状况的衡量标准，并量化一家银行对整个系统的重要性，即其系统性。因此，使用所提出的方法，我们或许能够正式识别“太大而不能倒”？因此，我们可能会改进潜在政策干预的针对性。对信用违约互换拍卖的分析应该会揭示该机制的可靠性，以发现违约发行人债券的正确价格，并可能指出其不足之处，并对拍卖机制提出改进建议。结果应该会引起监管机构、央行和政策制定者的兴趣。结果将被广泛传播，以促进相关机构的应用。

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.