Template-Type: ReDIF-Paper 1.0 
Title: On the trade-offs in money market benchmarks' stabilisation
Author-Name: Marcin Dec 
Abstract: We propose a theoretical stochastic set-up for a panel of contributors to a volume weighted raw money market index, which is the main contribution of this research. 'Thehypothetical problems with: changes in the panel's composition as well as the irregularity of daily contributions may strongly influence the utility of a final benchmark tobe used in medium and long term loan contracts, especially with retail clients. Our focus is on several classes of benchmarks' formulae that are derived from this raw indexand allow for some confinement of the mentioned drawbacks while decreasing qualitymeasured by other criteria (goodness of fit). The set of classes include: the geometric time weights with different smoothing parameters and observation window's lengthused on the original raw index, stabilisation of the raw index in bands, rolling windowvolume weights rebalancing and finally the geometric time weights performed on log-transformed index (log-raw index is calculated from volume logarithms). The potential trade-offs in such a benchmark's stabilisation efforts are shown.
Number: 2018-039
Length: 20 pages 
Creation-Date: 2018-08
Keywords: financial market indices, interest rate benchmarks, compound Poisson process, index volatility reduction, transaction based benchmarks
Classification-JEL: G12, G13, E43
File-URL: https://hdl.handle.net/20.500.12182/1139
File-Format: Application/pdf
DOI: 10.33119/kaewps2018039
Handle: RePEc:sgh:kaewps:2018039