Libor at crossroads: stochastic switching detection using information theory quantifiers

DOI10.1016/J.CHAOS.2016.02.009zbMATH Open1415.91298arXiv1603.02874OpenAlexW2293107075MaRDI QIDQ508302FDOQ508302

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

Publication date: 10 February 2017

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

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.

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

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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)

Cites Work

• Estimating and Testing Linear Models with Multiple Structural Changes
• Permutation entropy and its main biomedical and econophysics applications: a review
• Title not available (Why is that?)
• Statistical complexity and disequilibrium
• Measures of statistical complexity: why?
• LIBOR troubles: anomalous movements detection based on maximum entropy
• A permutation information theory tour through different interest rate maturities: the Libor case

Cited In (3)

• Characterization of time series through information quantifiers
• Bandt-Pompe symbolization dynamics for time series with tied values: A data-driven approach
• Complexity in quantitative finance and economics

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