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Describe Figure 3 (hint: you can start by defining the derivative that is depicted and build from there). Explain how the information content of this
Describe Figure 3 (hint: you can start by defining the derivative that is depicted and build from there). Explain how the information content of this figure can be used to inform: (i) policymakers and (ii) practitioners. If you were an investor, what concerns would you have about credit- and liquidity-risk across time? Figure 3: Euribor and OIS rates and spreads 3M EURIBOR and OIS rates 600 500- 400 300- 200 100- 0- 3M and 12M EURIBOR-OIS spread 200- 150 - 100- 50- sumn Aug-2007 Apr-2008 Dec-2008 Aug-2009 Apr-2010 Dec-2010 Sep-2011 May-2012 Jan-2013 Note: The top panel reports the 3-month Euribor (light gray) and the 3-month OIS (dark gray). The bottom panel reports the spread between the Euribor and the OIS rates across two maturities: 3-month maturity (dark gray) and 12-month maturity (light gray). The vertical axis reports annualized interest rates in basis points. Describe Figure 3 (hint: you can start by defining the derivative that is depicted and build from there). Explain how the information content of this figure can be used to inform: (i) policymakers and (ii) practitioners. If you were an investor, what concerns would you have about credit- and liquidity-risk across time? Figure 3: Euribor and OIS rates and spreads 3M EURIBOR and OIS rates 600 500- 400 300- 200 100- 0- 3M and 12M EURIBOR-OIS spread 200- 150 - 100- 50- sumn Aug-2007 Apr-2008 Dec-2008 Aug-2009 Apr-2010 Dec-2010 Sep-2011 May-2012 Jan-2013 Note: The top panel reports the 3-month Euribor (light gray) and the 3-month OIS (dark gray). The bottom panel reports the spread between the Euribor and the OIS rates across two maturities: 3-month maturity (dark gray) and 12-month maturity (light gray). The vertical axis reports annualized interest rates in basis points
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