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DESCRIPTION:Umang Khetan\n\nUniversity of Iowa\n\nSynthetic Dollar Funding
 \n\nDate: Wednesday\, January 14\, 2026\n	Time: 11:30 am - 1:00 pm\n	Locatio
 n: Bronfman building\, Room 301\n\nAll are cordially invited to attend.\n
 \n\nAbstract\n\nI study how funding market frictions shape the pricing and
  availability of U.S. dollar credit. Global banks provide much of the worl
 d’s dollar credit. Yet\, their access to conventional wholesale funding ma
 rkets is increasingly constrained by tighter regulations. Using transactio
 n-level data to jointly analyze funding markets\, I show that foreign exch
 ange swaps emerge as a key alternative when wholesale funding becomes scar
 ce. Swaps enable banks to transform foreign currency into dollars\, creati
 ng a supply of “synthetic” dollars while hedging currency risk. However\, 
 this workaround is costly: as suppliers of synthetic dollars face balance 
 sheet costs\, swap prices increase with demand. I causally show that a 10%
  rise in banks’ demand raises the relative price of synthetic dollars by 7
  bps\, providing a novel demand-driven mechanism for violations of covered
  interest parity – a fundamental no-arbitrage condition. Through the lens 
 of a bank funding model calibrated to my estimates\, I show that the resul
 ting increase in intermediation costs ultimately necessitates central bank
  swap lines to sustain dollar credit supply. My findings highlight a key c
 hannel through which domestic funding frictions spill over to the internat
 ional financial system.\n
DTSTART:20260114T163000Z
DTEND:20260114T180000Z
LOCATION:Room 301\, Bronfman Building\, CA\, QC\, Montreal\, H3A 1G5\, 1001
  rue Sherbrooke Ouest
SUMMARY:Finance Area Seminar: Umang Khetan 
URL:https://www.mcgill.ca/desautels/channels/event/finance-area-seminar-uma
 ng-khetan-370254
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