Option Valuation with Observable Volatility and Jump Dynamics Staff Working Paper 2015-39 Peter Christoffersen, Bruno Feunou, Yoontae Jeon Under very general conditions, the total quadratic variation of a jump-diffusion process can be decomposed into diffusive volatility and squared jump variation. We use this result to develop a new option valuation model in which the underlying asset price exhibits volatility and jump intensity dynamics. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing JEL Code(s): G, G1, G12
What Does Structural Analysis of the External Finance Premium Say About Financial Frictions? Staff Working Paper 2019-38 Jelena Zivanovic I use a structural vector autoregression (SVAR) with sign restrictions to provide conditional evidence on the behavior of the US external finance premium (EFP). The results indicate that the excess bond premium, a proxy for the EFP, reacts countercyclically to supply and monetary policy shocks and procyclically to demand shocks. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial markets, Recent economic and financial developments JEL Code(s): E, E3, E32, E4, E44
Optimal Monetary Policy and Price Stability Over the Long-Run Staff Working Paper 2007-26 Oleksiy Kryvtsov, Malik Shukayev, Alexander Ueberfeldt This paper examines the role of monetary policy in an environment with aggregate risk and incomplete markets. In a two-period overlapping-generations model with aggregate uncertainty and nominal bonds, optimal monetary policy attains the ex-ante Pareto optimal allocation. Content Type(s): Staff research, Staff working papers Research Topic(s): Monetary policy framework JEL Code(s): E, E5
Pricing Interest Rate Derivatives in a Non-Parametric Two-Factor Term-Structure Model Staff Working Paper 1999-19 John Knight, Fuchun Li, Mingwei Yuan Diffusion functions in term-structure models are measures of uncertainty about future price movements and are directly related to the risk associated with holding financial securities. Correct specification of diffusion functions is crucial in pricing options and other derivative securities. In contrast to the standard parametric two-factor models, we propose a non-parametric two-factor term-structure model that […] Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Market structure and pricing JEL Code(s): C, C1, C14, C2, C22, G, G1, G13
February 8, 2018 At the Crossroads: Innovation and Inclusive Growth Remarks Carolyn A. Wilkins G7 Symposium on Innovation and Inclusive Growth Montebello, Quebec Senior Deputy Governor Carolyn A. Wilkins discusses technological progress and how policy-makers can harness it for economic growth that benefits everyone. Content Type(s): Press, Speeches and appearances, Remarks Research Topic(s): Central bank research, International topics, Labour markets, Market structure and pricing, Productivity, Recent economic and financial developments
The Term Structures of Loss and Gain Uncertainty Staff Working Paper 2020-19 Bruno Feunou, Ricardo Lopez Aliouchkin, Roméo Tedongap, Lai Xu We investigate the uncertainty around stock returns at different investment horizons. Since a return is either a loss or a gain, we categorize return uncertainty into two components—loss uncertainty and gain uncertainty. We then use these components to evaluate investment. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Econometric and statistical methods JEL Code(s): G, G1, G12
Rollover Risk, Liquidity and Macroprudential Regulation Staff Working Paper 2014-23 Toni Ahnert I study rollover risk in the wholesale funding market when intermediaries can hold liquidity ex ante and are subject to fire sales ex post. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial system regulation and policies JEL Code(s): G, G0, G01, G1, G11, G2, G28
Selection of the Truncation Lag in Structural VARs (or VECMs) with Long-Run Restrictions Staff Working Paper 1995-9 Alain DeSerres, Alain Guay authors examine the issue of lag-length selection in the context of a structural vector autoregression (VAR) and a vector error-correction model with long-run restrictions. First, they show that imposing long-run restrictions implies, in general, a moving-average (MA) component in the stationary multivariate representation. Then they examine the sensitivity of estimates of the permanent and transitory […] Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods
Credit Card Minimum Payment Restrictions Staff Working Paper 2024-26 Jason Allen, Michael Boutros, Benedict Guttman-Kenney We study a government policy that restricts repayment choices with the aim of reducing credit card debt and estimate its effects by applying a difference-in-differences methodology to comprehensive credit-reporting data about Canadian consumers. We find the policy has trade-offs: reducing revolving debt comes at a cost of reducing credit access, and potentially increasing delinquency. Content Type(s): Staff research, Staff working papers Research Topic(s): Credit and credit aggregates, Financial system regulation and policies JEL Code(s): D, D1, D18, E, E2, E21, G, G2, G28, G5, G51
Business Cycles in Small, Open Economies: Evidence from Panel Data Between 1900 and 2013 Staff Working Paper 2016-48 Thuy Lan Nguyen, Wataru Miyamoto Using a novel data set for 17 countries dating from 1900 to 2013, we characterize business cycles in both small developed and developing countries in a model with financial frictions and a common shock structure. We estimate the model jointly for these 17 countries using Bayesian methods. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models, International topics JEL Code(s): E, E1, E13, E3, E32, F, F4, F41, F44