FSRC - Financial System Research Center

• Losses from Simulated Defaults in Canada's Large Value Transfer System

  Staff Discussion Paper 2010-14 Nellie Zhang, Tom Hossfeld

  The Large Value Transfer System (LVTS) loss-sharing mechanism was designed to ensure that, in the event of a one-participant default, the collateral pledged by direct members of the system would be sufficient to cover the largest possible net debit position of a defaulting participant. However, the situation may not hold if the indirect effects of the defaults are taken into consideration, or if two participants default during the same payment cycle.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial stability, Payment clearing and settlement systems JEL Code(s): E, E4, E47, G, G2, G21

• Banks, Credit Market Frictions, and Business Cycles

  Staff Working Paper 2010-24 Ali Dib

  The author proposes a micro-founded framework that incorporates an active banking sector into a dynamic stochastic general-equilibrium model with a financial accelerator.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Economic models, Financial stability JEL Code(s): E, E3, E32, E4, E44, G, G1

• Central Bank Haircut Policy

  Staff Working Paper 2010-23 James Chapman, Jonathan Chiu, Miguel Molico

  We present a model of central bank collateralized lending to study the optimal choice of the haircut policy. We show that a lending facility provides a bundle of two types of insurance: insurance against liquidity risk as well as insurance against downside risk of the collateral.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Financial services, Financial system regulation and policies, Monetary policy implementation, Payment clearing and settlement systems JEL Code(s): E, E4, E40, E5, E50

• Liquidity, Risk, and Return: Specifying an Objective Function for the Management of Foreign Reserves

  Staff Discussion Paper 2010-13 Yuliya Romanyuk

  An objective function is a key component of a strategic portfolio management model used to determine the optimal allocations of assets and, possibly, their associated liabilities over some investment horizon.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Foreign reserves management JEL Code(s): G, G1, G11

• Liquidity Transformation and Bank Capital Requirements

  Staff Working Paper 2010-22 Hajime Tomura

  This paper presents a dynamic general equilibrium model where asymmetric information about asset quality leads to asset illiquidity. Banking arises endogenously in this environment as banks can pool illiquid assets to average out their idiosyncratic qualities and issue liquid liabilities backed by pooled assets whose total quality is public information.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial stability, Financial system regulation and policies JEL Code(s): D, D8, D82, E, E4, E44, G, G2, G21

• Identifying Asymmetric Comovements of International Stock Market Returns

  Staff Working Paper 2010-21 Fuchun Li

  Based on a new approach for measuring the comovements between stock market returns, we provide a nonparametric test for asymmetric comovements in the sense that stock market downturns will lead to stronger comovements than market upturns.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial stability, Financial system regulation and policies, International topics JEL Code(s): C, C4, C49, F, F2, F21, G, G1, G15, G19

• Asset-Liability Management: An Overview

  Staff Discussion Paper 2010-10 Yuliya Romanyuk

  Relevant literature on asset-liability management (ALM) is reviewed and different ALM approaches are discussed that may be of interest to the Bank of Canada for the purpose of modelling the Exchange Fund Account (EFA).

  Content Type(s): Staff research, Staff discussion papers Topic(s): Foreign reserves management JEL Code(s): G, G1, G11

• An Assessment of the Bank of Canada's Term PRA Facility

  Staff Working Paper 2010-20 Emanuella Enenajor, Alex Sebastian, Jonathan Witmer

  This paper empirically assesses the effectiveness of the Bank of Canada's term Purchase and Resale Agreement (PRA) facility in reducing short-term bank funding pressures, as measured by the CDOR-OIS spread.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Financial stability JEL Code(s): E, E5, E58, G, G1, G12, G18

• A Model of Housing Stock for Canada

  Staff Working Paper 2010-19 David Dupuis, Yi Zheng

  Using an error-correction model (ECM) framework, the authors attempt to quantify the degree of disequilibrium in Canadian housing stock over the period 1961–2008 for the national aggregate and over 1981–2008 for the provinces.

  Content Type(s): Staff research, Staff working papers Topic(s): Domestic demand and components JEL Code(s): E, E2, E21, J, J0, J00

• International Capital Flows and Bond Risk Premia

  Staff Working Paper 2010-14 Jesus Sierra

  This paper studies the impact of international capital flows on asset prices through risk premia. We investigate whether foreign purchases of U.S. Treasury securities significantly contributed to the decline in excess returns on long-term bonds between 1995 and 2008.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): C, C2, C22, F, F3, F31, F32, F34, G, G1, G11, G12, G15