C - Mathematical and Quantitative Methods

• Implications of Asymmetry Risk for Portfolio Analysis and Asset Pricing

  Staff Working Paper 2007-47 Fousseni Chabi-Yo, Dietmar Leisen, Eric Renault

  Asymmetric shocks are common in markets; securities' payoffs are not normally distributed and exhibit skewness. This paper studies the portfolio holdings of heterogeneous agents with preferences over mean, variance and skewness, and derives equilibrium prices.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Market structure and pricing JEL Code(s): C, C5, C52, D, D5, D58, G, G1, G11, G12

• Multilateral Adjustment and Exchange Rate Dynamics: The Case of Three Commodity Currencies

  Staff Working Paper 2007-41 Jeannine Bailliu, Ali Dib, Takashi Kano, Lawrence L. Schembri

  In this paper, we empirically investigate whether multilateral adjustment to large U.S. external imbalances can help explain movements in the bilateral exchange rates of three commodity currencies – the Australian, Canadian and New Zealand (ACNZ) dollars.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Exchange rates JEL Code(s): C, C1, C11, C2, C22, F, F3, F31, F32

• The Canadian Business Cycle: A Comparison of Models

  Staff Working Paper 2007-38 Frédérick Demers, Ryan Macdonald

  This paper examines the ability of linear and nonlinear models to replicate features of real Canadian GDP. We evaluate the models using various business-cycle metrics.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods JEL Code(s): C, C3, C32, E, E3, E37

• Computing Optimal Policy in a Timeless-Perspective: An Application to a Small-Open Economy

  Staff Working Paper 2007-32 Michel Juillard, Florian Pelgrin

  Since the contribution of Kydland and Prescott (1977), it is well known that the optimal Ramsey policy is time inconsistent. In a series of recent contributions, Woodford (2003) proposes a new methodology to circumvent this problem, namely the timeless perspective solution.

  Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy framework JEL Code(s): C, C6, E, E5, E6

• Managing Adverse Dependence for Portfolios of Collateral in Financial Infrastructures

  Staff Working Paper 2007-25 Alejandro García, Ramazan Gençay

  We propose a framework that allows a portfolio manager to quantify the probability of simultaneous losses in multiple assets of a collateral portfolio. Using this framework, we propose a methodology to conduct stress tests on the market value of the portfolio of collateral when undesirable extreme dependence occurs.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets, Financial stability JEL Code(s): C, C1, C10, G, G0, G00, G1, G10

• Multivariate Realized Stock Market Volatility

  Staff Working Paper 2007-20 Gregory Bauer, Keith Vorkink

  We present a new matrix-logarithm model of the realized covariance matrix of stock returns. The model uses latent factors which are functions of both lagged volatility and returns.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): C, C3, C32, C5, C53, G, G1, G14

• Optimization in a Simulation Setting: Use of Function Approximation in Debt Strategy Analysis

  Staff Working Paper 2007-13 David Bolder, Tiago Rubin

  The stochastic simulation model suggested by Bolder (2003) for the analysis of the federal government's debt-management strategy provides a wide variety of useful information. It does not, however, assist in determining an optimal debt-management strategy for the government in its current form.

  Content Type(s): Staff research, Staff working papers Topic(s): Debt management, Econometric and statistical methods, Financial markets, Fiscal policy JEL Code(s): C, C0, C1, C14, C15, C5, C51, C52, C6, C61, C65, E, E6, G, G1, H, H6, H63

• Evaluating Forecasts from Factor Models for Canadian GDP Growth and Core Inflation

  Staff Working Paper 2007-8 Frédérick Demers, Calista Cheung

  This paper evaluates the performance of static and dynamic factor models for forecasting Canadian real output growth and core inflation on a quarterly basis. We extract the common component from a large number of macroeconomic indicators, and use the estimates to compute out-of-sample forecasts under a recursive and a rolling scheme with different window sizes.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C3, C32, E, E3, E37

• Monetary Policy Committees in Action: Is There Room for Improvement?

  Staff Working Paper 2007-6 Philipp Maier

  More than 80 central banks use a committee to take monetary policy decisions. The composition of the committee and the structure of the meeting can affect the quality of the decision making.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Monetary policy framework JEL Code(s): C, C9, C92, D, D7, D70, E, E5, E58

• Time-Consistent Control in Non-Linear Models

  Staff Working Paper 2007-3 Steve Ambler, Florian Pelgrin

  We show how to use optimal control theory to derive optimal time-consistent Markov-perfect government policies in nonlinear dynamic general equilibrium models, extending the result of Cohen and Michel (1988) for models with quadratic objective functions and linear dynamics. We replace private agents' costates by flexible functions of current states in the government's maximization problem.

  Content Type(s): Staff research, Staff working papers Topic(s): Fiscal policy, Monetary policy framework JEL Code(s): C, C6, C63, E, E6, E61, E62