Bo Young Chang - Latest

• Estimating the Slope of the Demand Function at Auctions for Government of Canada Bonds

  Staff Discussion Paper 2023-12 Bo Young Chang

  We use bid data from Government of Canada bond auctions between 1999 and 2021 to gauge the yield sensitivity of these bonds to the issuance amount. Our new metric estimates the demand function of the bidders at each auction and offers insights into the relationship between supply and yield of government bonds.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Debt management, Interest rates JEL Code(s): D, D4, D44, G, G1, G12

• A Simple Method for Extracting the Probability of Default from American Put Option Prices

  Staff Working Paper 2020-15 Bo Young Chang, Greg Orosi

  A put option is a financial contract that gives the holder the right to sell an asset at a specific price by (or at) a specific date. A put option can therefore provide its holder insurance against a large drop in the stock price. This makes the prices of put options an ideal source of information for a market-based measure of the probability of a firm’s default.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Market structure and pricing JEL Code(s): G, G1, G13, G3, G33

• The Cost of the Government Bond Buyback and Switch Programs in Canada

  Staff Analytical Note 2018-41 Bo Young Chang, Jun Yang, Parker Liu

  This note examines the costs of the Government of Canada bond buyback and switch programs between 1998 and 2016. Our analysis indicates that the auction design of the buyback program was effective in retiring government debt with minimal costs resulting from bid shading in auctions and price impact.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Debt management JEL Code(s): D, D4, D44

• Equity Option-Implied Probability of Default and Equity Recovery Rate

  Staff Working Paper 2016-58 Bo Young Chang, Greg Orosi

  There is a close link between prices of equity options and the default probability of a firm. We show that in the presence of positive expected equity recovery, standard methods that assume zero equity recovery at default misestimate the option-implied default probability.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Market structure and pricing JEL Code(s): G, G1, G13, G3, G33
• December 15, 2016

  Monitoring Shadow Banking in Canada: A Hybrid Approach

  Financial System Review - December 2016 Bo Young Chang, Gitanjali Kumar, André Usche, Michael Januska

  In Monitoring Shadow Banking in Canada: A Hybrid Approach, Bo Young Chang, Michael Januska, Gitanjali Kumar and André Usche discuss how lending that occurs outside the traditional banking system provides benefits to the economy but must be monitored carefully for potential financial sector vulnerabilities. They describe how the Bank defines and measures shadow banking and how it assesses vulnerabilities in the sector, using an approach that examines both markets and entities.

  Content Type(s): Publications, Financial System Review articles Topic(s): Financial institutions, Financial markets, Financial stability JEL Code(s): G, G0, G01, G2, G23
• May 13, 2014

  Measuring Uncertainty in Monetary Policy Using Realized and Implied Volatility

  Bank of Canada Review - Spring 2014 Bo Young Chang, Bruno Feunou

  Uncertainty surrounding the Bank of Canada’s future policy rates is measured using implied volatility computed from interest rate options and realized volatility computed from intraday prices of interest rate futures. Both volatility measures show that uncertainty decreased following major policy actions taken by the Bank in response to the 2007–09 financial crisis. Findings also indicate that, on average, uncertainty decreases following the Bank’s policy rate announcements.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Monetary policy and uncertainty JEL Code(s): E, E5, E52, E58

• Measuring Uncertainty in Monetary Policy Using Implied Volatility and Realized Volatility

  Staff Working Paper 2013-37 Bo Young Chang, Bruno Feunou

  We measure uncertainty surrounding the central bank’s future policy rates using implied volatility computed from interest rate option prices and realized volatility computed from intraday prices of interest rate futures.

  Content Type(s): Staff research, Staff working papers Topic(s): Monetary and financial indicators, Monetary policy and uncertainty JEL Code(s): E, E4