Financial markets and funds management

• Relationships in the Interbank Market

  Staff working paper 2016-33 Jonathan Chiu, Cyril Monnet

  In the interbank market, banks will sometimes trade below the central bank's deposit rate. We explain this anomaly using a theory based on market frictions and relationship lending.

  Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E5 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Financial institutions and intermediation, Models and tools, Economic models, Monetary policy, Monetary policy tools and implementation

• Global Macro Risks in Currency Excess Returns

  Staff working paper 2016-32 Kimberly Berg, Nelson C. Mark

  We study a cross section of carry-trade-generated currency excess returns in terms of their exposure to global fundamental macroeconomic risk.

  Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E21, E4, E43, F, F3, F31, G, G1, G12 Research Theme(s): Financial markets and funds management, International markets and currencies, Market functioning, Models and tools, Economic models

• Clearing and Settlement Systems from Around the World: A Qualitative Analysis

  Staff discussion paper 2016-14 Michael Tompkins, Ariel Olivares

  As Canada continues to engage in a dialogue to develop the approach to modernizing its core payment systems, we analyze the core payment systems that exist in countries around the world. We study payment systems in 27 jurisdictions, encompassing a broad range of geographic regions, through three levels of analysis.

  Content Type(s): Staff research, Staff discussion papers JEL Code(s): E, E4, E42, L, L1, L14, L15, L5, L52 Research Theme(s): Financial markets and funds management, Market structure, Money and payments, Payment and financial market infrastructures

• Identification and Estimation of Risk Aversion in First-Price Auctions with Unobserved Auction Heterogeneity

  Staff working paper 2016-23 Serafin Grundl, Yu Zhu

  This paper shows point identification in first-price auction models with risk aversion and unobserved auction heterogeneity by exploiting multiple bids from each auction and variation in the number of bidders. The required exclusion restriction is shown to be consistent with a large class of entry models.

  Content Type(s): Staff research, Staff working papers JEL Code(s): C, C1, C14, C5, C57, D, D4, D44, L, L0, L00 Research Theme(s): Financial markets and funds management, Market structure, Models and tools, Econometric, statistical and computational methods

• Retail Order Flow Segmentation

  Staff working paper 2016-20 Corey Garriott, Adrian Walton

  In August 2012, the New York Stock Exchange launched the Retail Liquidity Program (RLP), a trading facility that enables participating organizations to quote dark limit orders executable only by retail traders.

  Content Type(s): Staff research, Staff working papers JEL Code(s): G, G1, G14, G2, G20, L, L1, L10 Research Theme(s): Financial markets and funds management, Market functioning, Market structure

• What to Expect When China Liberalizes Its Capital Account

  Staff discussion paper 2016-10 Mark Kruger, Gurnain Pasricha

  When China joined the World Trade Organization in December 2001, it marked a watershed for the world economy. Ten years from now, the opening of China’s capital account and the financial integration that will unfold will be viewed as a milestone of similar importance.

  Content Type(s): Staff research, Staff discussion papers JEL Code(s): F, F3, F31, F32, G, G1, G18 Research Theme(s): Financial markets and funds management, International markets and currencies, Financial system, Financial stability and systemic risk, Structural challenges, International trade, finance and competitiveness

• A General Approach to Recovering Market Expectations from Futures Prices with an Application to Crude Oil

  Staff working paper 2016-18 Christiane Baumeister, Lutz Kilian

  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.

  Content Type(s): Staff research, Staff working papers JEL Code(s): C, C5, C53, D, D8, D84, G, G1, G14, Q, Q4, Q43 Research Theme(s): Financial markets and funds management, Market functioning, Models and tools, Econometric, statistical and computational methods

• Opaque Assets and Rollover Risk

  Staff working paper 2016-17 Benjamin Nelson, Toni Ahnert

  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.

  Content Type(s): Staff research, Staff working papers JEL Code(s): G, G0, G01, G2 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Financial institutions and intermediation, Financial stability and systemic risk

• A Bitcoin Standard: Lessons from the Gold Standard

  Staff working paper 2016-14 Warren E. Weber

  This paper imagines a world in which countries are on the Bitcoin standard, a monetary system in which all media of exchange are Bitcoin or are backed by it. The paper explores the similarities and differences between the Bitcoin standard and the gold standard and describes the media of exchange that would exist under the Bitcoin standard.

  Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E41, E42, E5, E58 Research Theme(s): Financial markets and funds management, International markets and currencies, Monetary policy, Monetary policy framework and transmission, Money and payments, Digital assets and fintech

• Capital Structure, Pay Structure and Job Termination

  Staff working paper 2016-12 Jason Allen, James R. Thompson

  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.

  Content Type(s): Staff research, Staff working papers JEL Code(s): G, G2, G24, J, J3, J33 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Financial institutions and intermediation, Household and business credit, Models and tools, Economic models