G - Financial Economics
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A General Approach to Recovering Market Expectations from Futures Prices with an Application to Crude Oil
Futures markets are a potentially valuable source of information about price expectations. Exploiting this information has proved difficult in practice, because time-varying risk premia often render the futures price a poor measure of the market expectation of the price of the underlying asset. -
Opaque Assets and Rollover Risk
We model the asset-opacity choice of an intermediary subject to rollover risk in wholesale funding markets. Greater opacity means investors form more dispersed beliefs about an intermediary’s profitability. -
Asset Encumbrance, Bank Funding and Financial Fragility
In this piece we show that a limit on the level of asset encumbrance and minimum capital requirements are effective tools for minimizing the incentive for banks to take excessive risk. -
Capital Structure, Pay Structure and Job Termination
We develop a model to analyze the link between financial leverage, worker pay structure and the risk of job termination. Contrary to the conventional view, we show that even in the absence of any agency problem among workers, variable pay can be optimal despite workers being risk averse and firms risk neutral. -
Dating Systemic Financial Stress Episodes in the EU Countries
This paper introduces a new methodology to date systemic financial stress events in a transparent, objective and reproducible way. The financial cycle is captured by a monthly country-specific financial stress index. -
Measuring Systemic Risk Across Financial Market Infrastructures
We measure systemic risk in the network of financial market infrastructures (FMIs) as the probability that two or more FMIs have a large credit risk exposure to the same FMI participant. -
A Framework in Search of an Optimal Margining Policy for Official Institutions: The Canadian Experience
One of the main outcomes of the global financial crisis has been a series of new regulations imposed on the financial system and specifically on banks. -
Canadian Repo Market Ecology
This is the first of the Financial Markets Department’s descriptions of Canadian financial industrial organization. The document discusses the organization of the repurchase-agreement (repo) market in Canada. -
The Dynamics of Capital Flow Episodes
This paper proposes a novel methodology for identifying episodes of strong capital flows based on a regime-switching model. In comparison with the existing literature, a key advantage of our methodology is to estimate capital flow regimes without the need for context- and sample-specific assumptions.