Research
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A Wake-Up-Call Theory of Contagion
We propose a novel theory of financial contagion. We study global coordination games of regime change in two regions with an initially uncertain correlation of regional fundamentals. -
Euro Area Government Bonds—Integration and Fragmentation During the Sovereign Debt Crisis
The paper analyzes the integration of euro area sovereign bond markets during the European sovereign debt crisis. It tests for contagion (i.e., an intensification in the transmission of shocks across countries), fragmentation (a reduction in spillovers) and flight-to-quality patterns, exploiting the heteroskedasticity of intraday changes in bond yields for identification. -
2013 Methods-of-Payment Survey Results
As the sole issuer of bank notes, the Bank of Canada conducts methods-of-payment (MOP) surveys to obtain a detailed and representative snapshot of Canadian payment choices, with a focus on cash usage. -
Sluggish Exports in Advanced Economies: How Much Is Due to Demand?
Exports in advanced economies have been relatively sluggish since 2011, growing at a much slower pace than observed before the global financial crisis. -
Funding Liquidity, Market Liquidity and the Cross-Section of Stock Returns
Following theory, we check that funding risk connects illiquidity, volatility and returns in the cross-section of stocks. We show that the illiquidity and volatility of stocks increase with funding shocks, while contemporaneous returns decrease with funding shocks. -
Fourier Inversion Formulas for Multiple-Asset Option Pricing
Plain vanilla options have a single underlying asset and a single condition on the payoff at the expiration date. For this class of options, a well-known result of Duffie, Pan and Singleton (2000) shows how to invert the characteristic function to obtain a closed-form formula for their prices. -
Effects of Funding Portfolios on the Credit Supply of Canadian Banks
This paper studies how banks simultaneously manage the two sides of their balance sheet and its implications for bank risk taking and real economic activity. First, we analyze how changes in funding affect the supply of bank loans. -
Securitization under Asymmetric Information over the Business Cycle
This paper studies the efficiency of financial intermediation through securitization in a model with heterogeneous investment projects and asymmetric information about the quality of securitized assets. I show that when retaining part of the risk, the issuer of securitized assets may credibly signal its quality. -
What Drives Bank-Intermediated Trade Finance? Evidence from Cross-Country Analysis
Empirical work on the underlying causes of the recent dislocations in bank-intermediated trade finance has been limited by the poor availability of hard data. This paper analyzes the key determinants of bank-intermediated trade finance using a novel data set covering ten banking jurisdictions.