There is a broad consensus that the intraday interest rate should be set to zero on efficiency grounds. In this work we document that, while in normal times money market rates are roughly in line with this efficiency criterion, they may deviate by a large extent in a situation of liquidity tension, like the one taking place at the outset of the subprime financial turmoil. We provide an analysis of the European electronic interbank market (e-MID) with high frequency data, showing that the hourly interest rate ? implicitly defined by the intraday pattern of the overnight rate ? jumped by more than ten times (from 0.2 bp to 2.2 bp) in the reserve maintenance period starting on August 8th 2007. This finding has no straight foward explanation, since the Eurosystem supplies intraday liquidity at no cost and without limit, except for the collateral requirement.
We attribute this result to the sudden increase of the liquidity and credit risks taking place at the outset of the financial turmoil, with two likely consequences. First, in times of liquidity crisis the intraday credit provided by the central bank is an imperfect substitute for an early delivery of overnight funds. Then the market price of intraday liquidity incorporates a liquidity premium, making it deviate from the cost of daylight central bank overdrafts. Second, the widening of the spread between unsecured and secured interbank interest rates implies an increase of the cost of collateral, making it more costly to get intraday credit from the central bank. A stronger demand of collateral, in order to guarantee a larger amount of available funds from the Eurosystem, has presumably contributed to making the collateral requirement more costly.
The Primary Key should be the table name plus “ID” (e.g., MemberID) and should be the same name in the table where it is used as a Foreign Key. (There are exceptions. In this course, the Foreign Keys LoanedToID and MemberID in tblMemberCD table both go back to the Primary Key MemberID in tblMember.) The Primary Key should always be the first field in each table, followed by any foreign key(s). Primary Keys should never be actual data—not even something unique like a Social Security number or Student ID. These values are obtained from an outside source and, while seemingly unique and reliable, could produce data entry errors.
only if they add to the value of the firm. If we assume that managers act so to maximize the value of the firm, managers should then identify, and undertake, all projects that add value to the company so as to maximise shareholder value.
This theory of capital investment decision-making implies that managers should establish the expected value that a project is expected to create. This should be done through the use of value based or discounted cash flow (DCF) techniques, in particular, the net present value (NPV) approach. Capital investment decisions should then be based on these estimates of value.
