"The Price of Money: The Reserves Convertibility Premium over the Term Structure"
Kjell Nyborg, Professor of Finance at University of Zurich, will present his research at SSE main building (Room A720) on Friday, April 12 at 10:30 CET.
Starttid:
2024-04-12 at 10:30
Sluttid:
2024-04-12 at 11:45
Plats:
Room A720, SSE main building, entrance via Bertil Ohlins Gata 4
"The Price of Money: The Reserves Convertibility Premium over the Term Structure"
Abstract: Central bank money provides utility by serving as means of exchange for virtually all transactions in the economy. Central banks issue reserves (money) to banks in exchange for assets such as government bonds. If additional reserves have value to a bank, an asset’s degree of convertibility into reserves can affect its price. We show the existence of a government bond reserves convertibility premium, which tapers off at longer maturities. The degree of convertibility is priced, but heterogeneously so. Our findings have implications for our understanding of reserves, liquidity premia, the term structure of interest rates, and central bank collateral policy.