The author proposes a micro-founded framework that incorporates an active banking sector into a dynamic stochastic general-equilibrium model with a financial accelerator.
An objective function is a key component of a strategic portfolio management model used to determine the optimal allocations of assets and, possibly, their associated liabilities over some investment horizon.
This paper presents a dynamic general equilibrium model where asymmetric information about asset quality leads to asset illiquidity. Banking arises endogenously in this environment as banks can pool illiquid assets to average out their idiosyncratic qualities and issue liquid liabilities backed by pooled assets whose total quality is public information.
Based on a new approach for measuring the comovements between stock market returns, we provide a nonparametric test for asymmetric comovements in the sense that stock market downturns will lead to stronger comovements than market upturns.
Relevant literature on asset-liability management (ALM) is reviewed and different ALM approaches are discussed that may be of interest to the Bank of Canada for the purpose of modelling the Exchange Fund Account (EFA).
This paper empirically assesses the effectiveness of the Bank of Canada's term Purchase and Resale Agreement (PRA) facility in reducing short-term bank funding pressures, as measured by the CDOR-OIS spread.
This paper studies the impact of international capital flows on asset prices through risk premia. We investigate whether foreign purchases of U.S. Treasury securities significantly contributed to the decline in excess returns on long-term bonds between 1995 and 2008.
In the Canadian large value payment system an important goal is to understand how liquidity is transferred through the system and hence how efficient the system is in settling payments. Understanding the structure of the underlying network of relationships between participants in the payment system is a crucial step in achieving the goal.
This paper examines empirically the impact of financial stress on the transmission of monetary policy shocks in Canada. The model used is a threshold vector autoregression in which a regime change occurs if financial stress conditions cross a critical threshold.
In this paper, we show that in a model where investors have heterogeneous preferences, the expected return of risky assets depends on the idiosyncratic coskewness beta, which measures the co-movement of the individual stock variance and the market return.