Proceedings of a conference held by the Bank of Canada, May 2006

Session 1: Prices and Liquidity

Corporate Bond Market Transparency: Informational Efficiency, Competition, and Liquidity Concentration
Amy K. Edwards (Securities and Exchange Commission), Mahendrarajah Nimalendran (University of Florida and Securities and Exchange Commission), and Michael S. Piwowar (Securities and Exchange Commission)

Discussion:
David Goldreich (University of Toronto)

Price Formation and Liquidity Provision in International Bond Markets
Christopher D'Souza (Bank of Canada), Ingrid Lo (Bank of Canada), and Stephen Sapp (University of Western Ontario)

Discussion:
Joshua Slive (HEC Montreal)

Session 2: Links between Cash and Derivatives Markets

A Comparative Study of Canadian and U.S. Price Discovery In the Ten-Year Government Bond Market
Bryan Campbell (Concordia University) and Scott Hendry (Bank of Canada) and

Discussion:
Bruce Mizrach (Rutgers University)

The Drivers and Pricing of Liquidity in Interest Rate Options Markets
Prachi Deuskar (New York University), Anurag Gupta (Case Western Reserve University), and Marti G. Subrahmanyam (New York University)

Discussion:
Haitao Li (University of Michigan)

John Kuszczak Memorial Lecture

Discrete-Time Dynamic Term Structure Models with Generalized Market Prices of Risk
Kenneth Singleton (Stanford University)

Session 3: High-Frequency Analysis of the Yield Curve

Informed and Strategic Order Flow in the Bond Market
Paolo Pasquariello (University of Michigan) and Clara Vega (University of Rochester and Board of Governors of the Federal Reserve)

Discussion:
Kathy Yuan (University of Michigan)

Monetary Policy Tick-by-Tick
Michael Fleming (Federal Reserve Bank of New York) and Monika Piazzesi (University of Chicago, NBER, and CEPR)

Discussion:
Eric Swanson (Federal Reserve Bank of San Francisco)

Session 4: No Arbitrage Pricing and Strategies

No-Arbitrage Macroeconomic Determinants of the Yield Curve
Ruslan Bikbov (Columbia Business School) and Mikhail Chernov (Columbia Business School)

Discussion:
Michael Gallmeyer (Texas A&M)

Risk and Return in Fixed Income Arbitrage: Nickels in Front of a Steamroller?
Jefferson Duarte (University of Washington), Francis Longstaff (University of California, Los Angeles) and Fan Yu (University California, Irvine)

Discussion:
David Bolder (Bank of Canada)

Session 5: Multi-Country Models of the Term Structure

Can Affine Term Structure Models Help Us to Predict Exchange Rates?
Antonio Diez de los Rios (Bank of Canada)

Discussion:
Adrien Verdelhan (Boston University)

Estimating the Term Structure and Macro Dynamics in a Small Open Economy
Fousseni Chabi-Yo (Bank of Canada) and Jun Yang (Bank of Canada)

Discussion:
Sen Dong (Columbia University)

Session 6: Volatility and the Term Structure

The Causal Effect of Mortgage Refinancing on Interest-Rate Volatility: Empirical Evidence and Theoretical Implications
Jefferson Duarte (University of Washington)

Discussion:
Daniel Smith (Simon Fraser University)

Do Options Contain Information About Excess Bond Returns?
Caio Almeida (Ibmec Business School), Jeremy J. Graveline (Stanford University), and Scott Joslin (Stanford University)

Discussion:
Christopher Jones (University of Southern California)

Session 7: Might as Well Jump!

Affine-Quadratic Term Structure Models – Toward the Understanding of Jumps in Interest Rates
George J. Jiang (University of Arizona) and Shu Yan (University of Arizona)

Discussion:
Peter Christoffersen (McGill University)

Can Bonds Hedge Volatility Risk in the U.S. Treasury Market? A Specification Test for Affine Term Structure Models
Torben G. Andersen (Northwestern University and NBER) and Luca Benzoni (University of Minnesota)

Discussion:
Michael Johannes (Northwestern University)

Panel Discussion: Alternative Perspectives on Fixed Income Markets

Discussion 1:
David Longworth (Bank of Canada)

Discussion 2:
Mark Caplan (BMO Nesbitt Burns)

Discussion 3:
Pierre Collin-Dufresne (Goldman Sachs, New York)

Bank topic index: Debt management, Econometric and statistical methods, Financial markets, Interest rates, International topics, Market structure and pricing, Monetary policy implementation