Asset Pricing - Bank of Canada
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Bank of Canada RSS Feedsen2017-11-17T19:46:24+00:00Measuring Limits of Arbitrage in Fixed-Income Markets
http://www.bankofcanada.ca/2017/10/staff-working-paper-2017-44/
We use relative value to measure limits to arbitrage in fixed-income markets. Relative value captures apparent deviations from no-arbitrage relationships. It is simple, intuitive and can be computed model-free for any bond.2017-10-12T14:26:21+00:00enMeasuring Limits of Arbitrage in Fixed-Income Markets2017-10-12Asset PricingFinancial marketsInternational financial marketsStaff Working Paper 2017-44http://www.bankofcanada.ca/wp-content/uploads/2017/10/swp2017-44.pdfMeasuring Limits of Arbitrage in Fixed-Income MarketsJean-Sébastien FontaineGuillaume NolinOctober 2017GG1G12A Counterfactual Valuation of the Stock Index as a Predictor of Crashes
http://www.bankofcanada.ca/2017/09/staff-working-paper-2017-38/
Stock market fundamentals would not seem to meaningfully predict returns over a shorter-term horizon—instead, I shift focus to severe downside risk (i.e., crashes).2017-09-20T11:43:44+00:00enA Counterfactual Valuation of the Stock Index as a Predictor of Crashes2017-09-20Asset PricingFinancial stabilityStaff Working Paper 2017-38http://www.bankofcanada.ca/wp-content/uploads/2017/09/swp2017-38.pdfA Counterfactual Valuation of the Stock Index as a Predictor of CrashesTom RobertsSeptember 2017GG0G01G1G12G17G19Optimal Estimation of Multi-Country Gaussian Dynamic Term Structure Models Using Linear Regressions
http://www.bankofcanada.ca/2017/08/staff-working-paper-2017-33/
This paper proposes a novel asymptotic least-squares estimator of multi-country Gaussian dynamic term structure models that is easy to compute and asymptotically efficient, even when the number of countries is relatively large—a situation in which other recently proposed approaches lose their tractability.2017-08-10T07:38:59+00:00enOptimal Estimation of Multi-Country Gaussian Dynamic Term Structure Models Using Linear Regressions2017-08-10Asset PricingEconometric and statistical methodsExchange ratesInterest ratesStaff Working Paper 2017-33http://www.bankofcanada.ca/wp-content/uploads/2017/08/swp2017-33.pdfOptimal Estimation of Multi-Country Gaussian Dynamic Term Structure Models Using Linear RegressionsAntonio Diez de los RiosAugust 2017EE4E43FF3F31GG1G12G15Small‐Sample Tests for Stock Return Predictability with Possibly Non‐Stationary Regressors and GARCH‐Type Effects
http://www.bankofcanada.ca/2017/03/staff-working-paper-2017-10/
We develop a simulation-based procedure to test for stock return predictability with multiple regressors. The process governing the regressors is left completely free and the test procedure remains valid in small samples even in the presence of non-normalities and GARCH-type effects in the stock returns.2017-03-10T08:29:32+00:00enSmall‐Sample Tests for Stock Return Predictability with Possibly Non‐Stationary Regressors and GARCH‐Type Effects2017-03-10Asset PricingEconometric and statistical methodsFinancial marketsStaff Working Paper 2017-10http://www.bankofcanada.ca/wp-content/uploads/2017/03/swp2017-10.pdfSmall‐Sample Tests for Stock Return Predictability with Possibly Non‐Stationary Regressors and GARCH‐Type EffectsSermin GungorRichard LugerMarch 2017CC1C12C3C32GG1G14What Fed Funds Futures Tell Us About Monetary Policy Uncertainty
http://www.bankofcanada.ca/2016/12/staff-working-paper-2016-61/
The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main driver of uncertainty is a “path” factor signaling information about future policy actions, which is filtered from federal funds futures data.2016-12-28T08:34:12+00:00enWhat Fed Funds Futures Tell Us About Monetary Policy Uncertainty2016-12-28Asset PricingFinancial marketsInterest ratesStaff Working Paper 2016-61http://www.bankofcanada.ca/wp-content/uploads/2016/12/swp-2016-61.pdfWhat Fed Funds Futures Tell Us About Monetary Policy UncertaintyJean-Sébastien FontaineDecember 2016EE4E43E44E47GG1G12G13Equity Option-Implied Probability of Default and Equity Recovery Rate
http://www.bankofcanada.ca/2016/12/staff-working-paper-2016-58/
There is a close link between prices of equity options and the default probability of a firm. We show that in the presence of positive expected equity recovery, standard methods that assume zero equity recovery at default misestimate the option-implied default probability.2016-12-15T12:23:13+00:00enEquity Option-Implied Probability of Default and Equity Recovery Rate2016-12-15Asset PricingFinancial marketsMarket structure and pricingStaff Working Paper 2016-58http://www.bankofcanada.ca/wp-content/uploads/2016/12/swp2016-58.pdfEquity Option-Implied Probability of Default and Equity Recovery RateBo Young ChangGreg OrosiDecember 2016GG1G13G3G33On the Value of Virtual Currencies
http://www.bankofcanada.ca/2016/08/staff-working-paper-2016-42/
This paper develops an economic framework to analyze the exchange rate of virtual currency. Three components are important: first, the current use of virtual currency to make payments; second, the decision of forward-looking investors to buy virtual currency (thereby effectively regulating its supply); and third, the elements that jointly drive future consumer adoption and merchant acceptance of virtual currency.2016-08-30T10:26:51+00:00enOn the Value of Virtual Currencies2016-08-30Asset PricingDigital CurrenciesExchange ratesStaff Working Paper 2016-42http://www.bankofcanada.ca/wp-content/uploads/2016/08/swp2016-42.pdfOn the Value of Virtual CurrenciesWilko BoltMaarten van OordtAugust 2016EE4E42E5E51FF3F31GG1Time-Varying Crash Risk: The Role of Stock Market Liquidity
http://www.bankofcanada.ca/2016/07/staff-working-paper-2016-35/
We estimate a continuous-time model with stochastic volatility and dynamic crash probability for the S&P 500 index and find that market illiquidity dominates other factors in explaining the stock market crash risk. While the crash probability is time-varying, its dynamic depends only weakly on return variance once we include market illiquidity as an economic variable in the model.2016-07-22T13:04:46+00:00enTime-Varying Crash Risk: The Role of Stock Market Liquidity2016-07-22Asset PricingEconometric and statistical methodsFinancial stabilityStaff Working Paper 2016-35http://www.bankofcanada.ca/wp-content/uploads/2016/07/swp2016-35.pdfTime-Varying Crash Risk: The Role of Stock Market LiquidityPeter ChristoffersenBruno FeunouYoontae JeonChayawat OrnthanalaiJuly 2016GG0G01G1G12Global Macro Risks in Currency Excess Returns
http://www.bankofcanada.ca/2016/07/staff-working-paper-2016-32/
We study a cross section of carry-trade-generated currency excess returns in terms of their exposure to global fundamental macroeconomic risk.2016-07-20T11:59:17+00:00enGlobal Macro Risks in Currency Excess Returns2016-07-20Asset PricingExchange ratesInterest ratesStaff Working Paper 2016-32http://www.bankofcanada.ca/wp-content/uploads/2016/07/swp2016-32.pdfGlobal Macro Risks in Currency Excess ReturnsKimberly BergNelson C. MarkJuly 2016EE2E21E4E43FF3F31GG1G12Tractable Term-Structure Models and the Zero Lower Bound
http://www.bankofcanada.ca/2015/12/staff-working-paper-2015-46/
We greatly expand the space of tractable term-structure models. We consider one example that combines positive yields with rich volatility and correlation dynamics. Bond prices are expressed in closed form and estimation is straightforward.2015-12-14T09:07:38+00:00enTractable Term-Structure Models and the Zero Lower Bound2015-12-14Asset PricingInterest ratesInternational financial marketsInternational topicsTransmission of monetary policyUncertainty and monetary policyStaff Working Paper 2015-46http://www.bankofcanada.ca/wp-content/uploads/2015/12/wp2015-46.pdfTractable Term-Structure Models and the Zero Lower BoundAnh LeBruno FeunouChristian LundbladJean-Sébastien FontaineDecember 2015GG1G12