Search

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.

Deputy Governor Lawrence Schembri discusses pension funds and financial stability.

We examine how intermediary capitalization affects asset prices in a framework that allows for intermediary market power. We introduce a model in which capital-constrained intermediaries buy or trade an asset in an imperfectly competitive market, and we show that weaker capital constraints lead to both higher prices and intermediary markups.

The Montreal Exchange introduced futures contracts on 3-month Canadian bankers' acceptances, known as BAX, in 1988. In this article, the author explains the nature of this new instrument, which is bought and sold on the floor of the Exchange, and its role in hedging, speculation, and arbitrage. She briefly reviews the technical aspects of the market and explains the difference between BAX contracts and forward rate agreements. She also examines the market's rapid growth and its relationship to the market for treasury bills.

Recent consumer and merchant surveys show a decrease in the use of cash at the point of sale. Increasingly, consumers and merchants have access to a growing array of payment innovations as substitutes for cash.

A database of historical Government of Canada zero-coupon yield curves developed at the Bank of Canada is introduced in this article, which also includes an initial statistical analysis of the behaviour and evolution of the zero-coupon interest (spot) rates over the full period and two distinct subperiods. Specific areas of interest include the evolution of the levels of key interest rates and yield-curve measures over the sample as well as daily changes in the key interest rates and the yield-curve measures; the identification of a relatively small number of factors that drove the evolution of the yield curve; and the total returns that would have been realized by holding bonds of different maturities for a given holding period.

In this study, we enhance Markowitz portfolio selection with graph theory for the analysis of two portfolios composed of either EU or US assets. Using a threshold-based decomposition of their respective covariance matrices, we perturb the level of risk in each portfolio and build the corresponding sets of graphs.

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.

This paper jointly relaxes two assumptions in the literature that estimates games. These two assumptions are the parametric restriction on the model primitives and the restriction of equilibrium behaviors. Without imposing the above two assumptions, this paper identifies the primitives of the game.