G10 - General

• Repo Market Functioning when the Interest Rate Is Low or Negative

  Staff Discussion Paper 2017-3 Jean-Sébastien Fontaine, James Hately, Adrian Walton

  This paper investigates how a low or negative overnight interest rate might affect the Canadian repo markets. The main conclusion is that the repo market for general collateral will continue to function effectively.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial markets, Interest rates, Market structure and pricing JEL Code(s): D, D4, G, G1, G10, G12

• Are Counterparty Arrangements in Reinsurance a Threat to Financial Stability?

  Staff Working Paper 2016-39 Matt Davison, Darrell Leadbetter, Bin Lu, Jane Voll

  Interconnectedness among insurers and reinsurers at a global level is not well understood and may pose a significant risk to the sector, with implications for the macroeconomy. Models of the complex interactions among reinsurers and with other participants in the financial system and the real economy are at a very early stage of development.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial services, Financial stability, Financial system regulation and policies JEL Code(s): C, C6, C63, G, G1, G10, G15, G18, G2, G22, G28

• Implementing Market-Based Indicators to Monitor Vulnerabilities of Financial Institutions

  Staff Analytical Note 2016-5 Cameron MacDonald, Maarten van Oordt, Robin Scott

  This note introduces several market-based indicators and examines how they can further inform the Bank of Canada’s vulnerability assessment of Canadian financial institutions. Market-based indicators of leverage suggest that the solvency risk for major Canadian banks has increased since the beginning of the oil-price correction in the second half of 2014.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial stability JEL Code(s): G, G1, G10, G2, G21
• June 11, 2015

  Assessing Vulnerabilities in the Canadian Financial System

  Financial System Review - June 2015 Ian Christensen, Gitanjali Kumar, Césaire Meh, Lorie Zorn

  The authors present the four common cyclical vulnerabilities that appear in financial systems, providing examples of qualitative and quantitative indicators used to monitor these vulnerabilities across different sectors. They also discuss other inputs to the vulnerability assessment and to the internal process used at the Bank of Canada for identifying, evaluating and communicating vulnerabilities and risks, and highlight some of the key challenges in assessing financial system vulnerabilities and risks.

  Content Type(s): Publications, Financial System Review articles Topic(s): Financial stability JEL Code(s): G, G0, G01, G1, G10, G2, G20

• High-Frequency Trading around Macroeconomic News Announcements: Evidence from the U.S. Treasury Market

  Staff Working Paper 2014-56 George Jiang, Ingrid Lo, Giorgio Valente

  This paper investigates high-frequency (HF) market and limit orders in the U.S. Treasury market around major macroeconomic news announcements. BrokerTec introduced i- Cross at the end of 2007 and we use this exogenous event as an instrument to analyze the impact of HF activities on liquidity and price efficiency.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): G, G1, G10, G12, G14
• November 13, 2014

  The Use of Financial Derivatives by Canadian Firms

  Bank of Canada Review - Autumn 2014 Teodora Paligorova, Rhonda Staskow

  In Canada, about one-third of publicly listed non-financial firms use financial derivatives. The use of derivatives is widespread across all sectors of the economy and increases during periods of greater uncertainty. Non-financial firms that use derivatives are typically larger and more profitable and have lower volatility of earnings than those that do not use derivatives. Overall, the firm characteristics of Canadian hedgers seem to be consistent with those found in other jurisdictions.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rates, Financial markets JEL Code(s): G, G1, G10, G3, G32

• Improving Overnight Loan Identification in Payments Systems

  Staff Working Paper 2014-25 Mark Rempel

  Information on the allocation and pricing of over-the-counter (OTC) markets is scarce. Furfine (1999) pioneered an algorithm that provides transaction-level data on the OTC interbank lending market.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets, Interest rates, Payment clearing and settlement systems JEL Code(s): C, C3, C38, C5, C53, E, E4, E42, E44, G, G1, G10

• Interest on Cash, Fundamental Value Process and Bubble Formation on Experimental Asset Markets

  Staff Working Paper 2014-18 Giovanni Giusti, Janet Hua Jiang, Yiping Xu

  We study the formation of price bubbles on experimental asset markets where cash earns interest. There are two main conclusions.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Financial stability JEL Code(s): C, C9, C90, G, G1, G10

• Database of Sovereign Defaults, 2017

  Technical Report No. 101 David Beers, Jamshid Mavalwalla

  Until recently, there have been few efforts to systematically measure and aggregate the nominal value of the different types of sovereign government debt in default. To help fill this gap, the Bank of Canada’s Credit Rating Assessment Group (CRAG) has developed a comprehensive database of sovereign defaults posted on the Bank of Canada’s website.

  Content Type(s): Staff research, Technical reports Topic(s): Debt management, Development economics, Financial stability, International financial markets JEL Code(s): F, F3, F34, G, G1, G10, G14, G15

• 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