G20 - General
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Trading on Long-term Information
Investors who trade based on good research are said to be the backbone of stock markets: They conduct research to discover the value of stocks and, through their trading, guide financial prices to reflect true value. What can make their job difficult is that high-speed, short-term traders could use machine learning and other technologies to infer when informed investors are trading. -
Creations and Redemptions in Fixed-Income Exchange-Traded Funds: A Shift from Bonds to Cash
The creation and redemption activity of fixed-income exchange-traded funds listed in the United States has shifted. Funds of established issuers have traditionally exchanged their shares for baskets of bonds. In contrast, young funds managed by new issuers tend to create and redeem their shares almost exclusively in cash. Cash transactions imply that new funds are taking on exposure to liquidity risk. This has implications for financial stability. -
Borrowing Costs for Government of Canada Treasury Bills
The cost of borrowing Government of Canada treasury bills (t-bills) in the repurchase (repo) market is mainly explained by the relationship between the parties involved. Some pairs of parties conduct most of their repos for t-bills rather than bonds, and at relatively high borrowing costs. We speculate that these pairs have formed a mutually beneficial service relationship in which one party consistently receives t-bills, while the other receives cash at a relatively cheap rate. -
Home Equity Extraction and Household Spending in Canada
We use rich microdata to measure home equity extraction in Canada and track its evolution over time. We find home equity extraction has been rising in recent years and has likely contributed materially to dynamics in household spending. -
Systemic Risk and Collateral Adequacy
Many derivatives markets use collateral requirements calculated with industry-standard but dated methods that are not designed with systemic risk in mind. This paper explores whether the conservative nature of conventional collateral requirements outweighs their lack of consideration of systemic risk. -
Could Canadian Bond Funds Add Stress to the Financial System?
We create a hypothetical scenario to study the role bond funds play in intensifying shocks to the financial system. Using data from 2018 and 2007, we find that bond funds play a larger role now than they did in the past. -
Bond Funds and Fixed-Income Market Liquidity: A Stress-Testing Approach
This report provides a detailed technical description of a stress test model for investment funds called Ceto. -
Non-Bank Financial Intermediation in Canada: An Update
Non-bank financing provides an important funding source for the economy and is a valuable alternative to traditional banking. It helps enhance the efficiency and resiliency of the financial system while giving customers more choices for their financial services. Unlike banking, it is not prudentially regulated. -
Liquidity Management of Canadian Corporate Bond Mutual Funds: A Machine Learning Approach
When redeeming shares for investors, bond fund managers must choose a mix of cash and bond sales to honour their commitments. This note uses machine learning algorithms to uncover new patterns in decisions fund managers make to meet redemptions.