G - Financial Economics

• The Syndicated Loan Market: Developments in the North American Context

  Staff Working Paper 2003-15 Jim Armstrong

  The author describes the rapid development of the syndicated corporate loan market in the 1990s. He explores the historical forces that led to the development of the contemporary U.S. syndicated loan market, which is effectively a hybrid of the investment banking and commercial banking worlds.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial markets JEL Code(s): G, G1, G10, G2, G21

• An Index of Financial Stress for Canada

  Staff Working Paper 2003-14 Mark Illing, Ying Liu

  The authors develop an index of financial stress for the Canadian financial system. Stress is defined as the force exerted on economic agents by uncertainty and changing expectations of loss in financial markets and institutions.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial markets JEL Code(s): E, E5, G, G1, G10

• Collateral and Credit Supply

  Staff Working Paper 2003-11 Joseph Atta-Mensah

  The author examines the role of collateral in an environment where lenders and borrowers possess identical information and similar beliefs about its future value. Using option-pricing techniques, he shows that a secured loan contract is equivalent to a regular bond and an embedded option to the borrower to default.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Economic models JEL Code(s): E, E5, E51, G, G1, G11, G12, G13

• Valuation of Canadian- vs. U.S.-Listed Equity: Is There a Discount?

  Staff Working Paper 2003-6 Michael R. King, Dan Segal

  The authors examine how the valuation multiples assigned to the equity of Canadian-listed firms compare with the equity of comparable firms listed in the United States. They find that Canadian-listed firms trade at a discount to U.S.-listed firms across a range of valuation measures.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): G, G1, G12, G15

• Shift Contagion in Asset Markets

  Staff Working Paper 2003-5 Toni Gravelle, Maral Kichian, James Morley

  The authors develop a new methodology to investigate how crises cause the relationship between financial variables to change. Two possible sources of increased co-movement between markets during high-variance episodes are considered: larger common shocks operating through standard market linkages, and a structural change in the propagation of shocks between markets, called "shift contagion."

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): C, C3, C32, F, F4, F42, G, G1, G15

• Are Distorted Beliefs Too Good to be True?

  Staff Working Paper 2003-4 Miroslav Misina

  In a recent attempt to account for the equity-premium puzzle within a representative-agent model, Cecchetti, Lam, and Mark (2000) relax the assumption of rational expectations and in its place use the assumption of distorted beliefs. The author shows that the explanatory power of the distorted beliefs model is due to an inconsistency in the model and that an attempt to remove this inconsistency removes the model's explanatory power.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial markets JEL Code(s): D, D8, D84, G, G1, G12

• Managing Operational Risk in Payment, Clearing, and Settlement Systems

  Staff Working Paper 2003-2 Kim McPhail

  Awareness of operational risk has increased greatly in recent years, both at individual financial institutions and for payment, clearing, and settlement systems (PCSS). PCSS consist of networks of interconnected elements (i.e., central operators, participants, and settlement agents); operational problems at any one of the key elements have the potential to disrupt the system as a whole and negatively affect financial stability.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Payment clearing and settlement systems JEL Code(s): E, E4, E44, G, G2, G21

• Banking Crises and Contagion: Empirical Evidence

  Staff Working Paper 2003-1 Eric Santor

  Recent events, such as the East Asian, Mexican, Scandinavian, and Argentinian crises, have sparked considerable interest in exploring how shocks experienced by one country can spread vis-à-vis real and nominal links to other countries' banking systems. Given the large costs associated with banking-system failures, both economists and policy-makers are interested in predicting the onset of banking crises and assessing the likelihood of contagion during crisis events.

  Content Type(s): Staff research, Staff working papers Topic(s): International topics JEL Code(s): F, F3, F30, G, G2, G20