Libor at crossroads: stochastic switching detection using information theory quantifiers

DOI10.1016/J.CHAOS.2016.02.009MaRDI QIDQ508302zbMATH OpenOpenAlexFDO

Authors Aurelio F. Bariviera, M. Belén Guercio, Lisana B. Martinez, Osvaldo A. Rosso

Publication date 10 February 2017

Published in Chaos, Solitons and Fractals (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1603.02874

zbMATH Keywords

information theorypermutation entropyLiborpermutation statistical complexity

Mathematics Subject Classification ID

Applications of statistics to actuarial sciences and financial mathematics (62P05) Interest rates, asset pricing, etc. (stochastic models) (91G30) Financial applications of other theories (91G80)

Abstract: This paper studies the 28 time series of Libor rates, classified in seven maturities and four currencies), during the last 14 years. The analysis was performed using a novel technique in financial economics: the Complexity-Entropy Causality Plane. This planar representation allows the discrimination of different stochastic and chaotic regimes. Using a temporal analysis based on moving windows, this paper unveals an abnormal movement of Libor time series arround the period of the 2007 financial crisis. This alteration in the stochastic dynamics of Libor is contemporary of what press called "Libor scandal", i.e. the manipulation of interest rates carried out by several prime banks. We argue that our methodology is suitable as a market watch mechanism, as it makes visible the temporal redution in informational efficiency of the market.

Recommendations

• A permutation information theory tour through different interest rate maturities: the Libor case
• LIBOR troubles: anomalous movements detection based on maximum entropy
• A re-examination of Libor rigging: a time-varying cointegration perspective
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Cites work

• scientific article; zbMATH DE number 3062467 (Why is no real title available?)
• A permutation information theory tour through different interest rate maturities: the Libor case
• Estimating and Testing Linear Models with Multiple Structural Changes
• LIBOR troubles: anomalous movements detection based on maximum entropy
• Measures of statistical complexity: why?
• Permutation entropy and its main biomedical and econophysics applications: a review
• Statistical complexity and disequilibrium

Cited in

(8)

• Credit market jitters in the course of the financial crisis: a permutation entropy approach in measuring informational efficiency in financial assets
• A re-examination of Libor rigging: a time-varying cointegration perspective
• Bandt-Pompe symbolization dynamics for time series with tied values: a data-driven approach
• Characterization of time series through information quantifiers
• Complexity in quantitative finance and economics
• LIBOR troubles: anomalous movements detection based on maximum entropy
• A permutation information theory tour through different interest rate maturities: the Libor case
• A mechanism for LIBOR

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