1. Was the market harmed by Barclay's low balling of rates (e.g., rates are only moved...

1. Was the market harmed by Barclay's low balling of rates (e.g., rates are only moved down).

Solutions

Expert Solution

Solution:-

Yes, the market definitely got harmed by Barclay's low balling of rates. LIBOR acts as the benchmark for all interest rates charged by the bank on its loans and also the interest rates offered by it to the deposit holders.

So, while a lower LIBOR would reduce the interest cost of many market participants, it doesn't come without its negative effects. The Barclay's and many other institutions artifically suppressed the LIBOR in order to allow their traders to benefit on their derivatives trading positions in the market which means that the lowballing directly resulted in traders manipulating the market and using it to make unlawful and unethical gains. This resulted in losses to many market participants who had the opposite positions in the derivatives market.

This was not just unlawful but also harmed the integrity of the market which is the most crucial thing based on which market participants invest their capital and make markets work.

Moreover, artificially suppressing the benchmark rates is very harmful for the entire economy as the whole purpose of higher rates when required, etc get undone and the free markets don't work efficiently anymore in the credit market.

Therefore, the Barclay's low balling of rates was very harmful for the market even if the rates only moved down.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Although Western countries typically have low HIV prevalence rates (e.g., about 0.2% of the Australian population...

Although Western countries typically have low HIV prevalence rates (e.g., about 0.2% of the Australian population has HIV), clinics offering free HIV testing usually attract at-risk groups among whom the prevalence rate is much higher. Managers of such a clinic believe that 12% of their patients have HIV. The clinic uses a diagnostic test which returns a positive result in 98% of cases where the patient actually has HIV. Among patients without HIV, 96% of test results are negative. The...

1)Low interest rates tend to entice investors into the stock market where they can achieve better...

1)Low interest rates tend to entice investors into the stock market where they can achieve better returns. Select one: True False 2) Fiscal policy, the means by which the Canadian government imposes taxes on individuals and corporations and spends its money, has an impact on spending and thus an impact on the stock of some companies. Select one: True False 3) Stocks would be most favourably affected by Select one: a. a increase in interest rates and stable inflation. b....

BMY and CELG Acquization 1. Changes or shocks in macroeconomic (e.g., interest rates), industry (e.g., oil...

BMY and CELG Acquization 1. Changes or shocks in macroeconomic (e.g., interest rates), industry (e.g., oil price, consumer preferences) or global factors (e.g., tariffs and trade agreements) often leads to opportunities to create value through mergers and acquisitions. Articulate and analyze each of the main specific changes/shocks in factors that you believe are leading to the merger between BMY and CELG. 2. How will the merger help the acquirer address the impact of the above changes/shocks in factors you listed?

Why would low policy rates suggest low long-term interest rates?

Ikea and Pottery Barn are the only competitors in the low-cost trendy furniture market. At the...

Ikea and Pottery Barn are the only competitors in the low-cost trendy furniture market. At the beginning of 2013 Ikea announces that they will cut all prices by 25%, significantly below Pottery Barn’s prices. As a result, Pottery Barn quickly begins to lose market share, and realizes that if Ikea does not increase their prices Pottery Barn will go out of business. Pottery Barn brings an antitrust suit against Ikea, alleging that they are engaging in predatory pricing in violation...

1. If inflation is expected to be relatively low, then interest rates will tend to be...

1. If inflation is expected to be relatively low, then interest rates will tend to be relatively low, other things held constant. A. True B. False 2. Ms Parker found two opportunities of investment A (rate of return 3%, standard deviation 6%) and investment B (rate of return 8%, standard deviation 4%). Investment B is better than Investment A (hints: calculate each CV and then compare each other). A. True B. False 3. The larger the standard deviation is, the...

Why would low policy rates suggest low long-term interest rates? A simple answer

1.) If only the party that knows if a security has a low probability of default...

1.) If only the party that knows if a security has a low probability of default or a high probability of default is the issuer (borrower) of the security, then a likely outcome is A. markets are more efficient. B. no securities are ever sold. C. investors only purchase the least-risky securities at high prices. D. investors are willing to pay low prices for securities and only risky securities are sold. 2.) Once borrowers have taken out a loan, they...

1. When interest rates are low, people are more likely to spend (or borrow) and less...

1. When interest rates are low, people are more likely to spend (or borrow) and less likely to save. This is consistent with the slopes of both the demand and supply in the loanable funds market. True False 2. The loanable funds market is a fundamental piece of a country's ability to grow and develop. True False 3. Which of the following would SHIFT the demand for loanable funds to the RIGHT (i.e. INCREASE). Select all that apply. Expectations that...

Describe the relation between interest rates, inflation rates, and exchange rates. Explain how low inflation can...

Describe the relation between interest rates, inflation rates, and exchange rates. Explain how low inflation can affect revenues and profits of exporting companies

Subjects