G1 - General Financial Markets
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Liquidity risks at Canadian life insurance companies
We examine how life insurers manage liquidity risks created by their business model. We find that Canadian life insurers did not face significant liquidity draws and continued their usual investment behaviour during the COVID-19 crisis and as interest rates increased in 2022. -
What has been putting upward pressure on CORRA?
From the autumn of 2023 into early 2024, the Canadian Overnight Repo Rate Average (CORRA), a measure of the cost of overnight general collateral Canadian dollar repos, was consistently well above the Bank’s target for the overnight rate. We find that, among several factors, long bond positions that require repo financing are the main driver of the recent upward pressure on CORRA. -
Decomposing Large Banks’ Systemic Trading Losses
Do banks realize simultaneous trading losses because they invest in the same assets, or because different assets are subject to the same macro shocks? This paper decomposes the comovements of bank trading losses into two orthogonal channels: portfolio overlap and common shocks. -
Market structure of cryptoasset exchanges: Introduction, challenges and emerging trends
This paper provides an overview of cryptoasset exchanges. We contrast their design with exchanges in traditional financial markets and discuss emerging regulatory trends and innovations aimed at solving the problems cryptoasset exchanges face. -
January 15, 2024
Mapping out the implications of climate transition risk for the financial system
We develop a new analytical framework to understand the system-wide implications of climate transition risk. When applying this framework to Canadian data, we find that interconnections within the financial sector could amplify the direct effects of climate transition risk on financial entities. -
Understanding the Systemic Implications of Climate Transition Risk: Applying a Framework Using Canadian Financial System Data
Our study aims to gain insight on financial stability and climate transition risk. We develop a methodological framework that captures the direct effects of a stressful climate transition shock as well as the indirect—or systemic—implications of these direct effects. We apply this framework using data from the Canadian financial system. -
Finding the balance—measuring risks to inflation and to GDP growth
Using our new quantitative tool, we show how the risks to the inflation and growth outlooks have evolved over the course of 2023. -
Central Bank Crisis Interventions: A Review of the Recent Literature on Potential Costs
Central banks’ actions to stabilize financial markets and implement monetary policy during crises may come with costs and side effects. We provide a literature review of these costs and discuss measures that may mitigate the negative impacts of crisis actions. -
Decentralized finance: Innovations and challenges
Decentralized finance surged in popularity around 2020. We explore its value and limitations and highlight some potential regulatory concerns.