FSRC - Financial System Research Center

• Cash Management and Payment Choices: A Simulation Model with International Comparisons

  Staff Working Paper 2013-53 Carlos Arango, Yassine Bouhdaoui, David Bounie, Martina Eschelbach, Lola Hernández

  Despite various payment innovations, today, cash is still heavily used to pay for low-value purchases. This paper develops a simulation model to test whether standard implications of the theory on cash management and payment choices can explain the use of payment instruments by transaction size.

  Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Financial services, International topics JEL Code(s): C, C6, C61, E, E4, E41, E47

• Regime Switches in the Risk-Return Trade-Off

  Staff Working Paper 2013-51 Eric Ghysels, Pierre Guérin, Massimiliano Marcellino

  This paper deals with the estimation of the risk-return trade-off. We use a MIDAS model for the conditional variance and allow for possible switches in the risk-return relation through a Markov-switching specification.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): G, G1, G10, G12

• Funding Advantage and Market Discipline in the Canadian Banking Sector

  Staff Working Paper 2013-50 Mehdi Beyhaghi, Chris D'Souza, Gordon S. Roberts

  We employ a comprehensive data set and a variety of methods to provide evidence on the magnitude of large banks’ funding advantage in Canada, and on the extent to which market discipline exists across different securities issued by the Canadian banks.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Interest rates JEL Code(s): G, G0, G01, G2, G21, G28, G3, G32, G33

• A Distributional Approach to Realized Volatility

  Staff Working Paper 2013-49 Selma Chaker, Nour Meddahi

  This paper proposes new measures of the integrated variance, measures which use high-frequency bid-ask spreads and quoted depths. The traditional approach assumes that the mid-quote is a good measure of frictionless price.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): C, C1, C14, C5, C51, C58

• Volatility Forecasting when the Noise Variance Is Time-Varying

  Staff Working Paper 2013-48 Selma Chaker, Nour Meddahi

  This paper explores the volatility forecasting implications of a model in which the friction in high-frequency prices is related to the true underlying volatility. The contribution of this paper is to propose a framework under which the realized variance may improve volatility forecasting if the noise variance is related to the true return volatility.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): C, C1, C14, C5, C51, C58

• CoMargin

  Staff Working Paper 2013-47 Jorge Cruz Lopez, Jeffrey H. Harris, Christophe Hurlin, Christophe Pérignon

  We present CoMargin, a new methodology to estimate collateral requirements for central counterparties (CCPs) in derivatives markets. CoMargin depends on both the tail risk of a given market participant and its interdependence with other participants.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial institutions, Financial markets, Financial stability JEL Code(s): G, G1, G13

• Lessons from the Financial Crisis: Bank Performance and Regulatory Reform

  Staff Discussion Paper 2013-4 Neville Arjani, Graydon Paulin

  The financial systems of some countries fared materially better than others during the global financial crisis of 2007-09.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial system regulation and policies JEL Code(s): G, G2, G21, G28