G20 - General
-
-
Banking Regulation and Market Making
We model how securities dealers respond to regulations on leverage, position and liquidity such as those imposed by the Basel III framework. We show that while asset prices exhibit greater price impact, bid-ask spreads do not change and trading volumes may even increase. -
Options Decimalization
We document the outcome of an options decimalization pilot on Canada’s derivatives exchange. Decimalization improves measures of liquidity and price efficiency. The impact differs by the moneyness of an option and is greatest for out-of-the-money options. -
Retail Order Flow Segmentation
In August 2012, the New York Stock Exchange launched the Retail Liquidity Program (RLP), a trading facility that enables participating organizations to quote dark limit orders executable only by retail traders. -
Changes in Payment Timing in Canada’s Large Value Transfer System
This paper uncovers trends in payment timing in Canada’s Large Value Transfer System (LVTS) from 2003 to 2011. Descriptive analysis shows that LVTS payment activity has not been peaking in the late afternoon since 2008, and the improvement was most significant in 2009. -
June 11, 2015
Assessing Vulnerabilities in the Canadian Financial System
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. -
Testing for the Diffusion Matrix in a Continuous-Time Markov Process Model with Applications to the Term Structure of Interest Rates
The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process. Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal components. -
May 14, 2015
The “Bank” at the Bank of Canada
In this article, we describe the various types of banking services (payments, settlement and safekeeping) that the Bank of Canada provides to different types of clients (the Government of Canada, financial market infrastructures, financial institutions, foreign central banks and the Canada Deposit Insurance Corporation). We also explain the reasons the Bank provides these services and how this role supports its core mandates, in particular financial stability. Finally, we explore the factors driving the growth and evolution in the provision of these banking services. -
Securitization under Asymmetric Information over the Business Cycle
This paper studies the efficiency of financial intermediation through securitization in a model with heterogeneous investment projects and asymmetric information about the quality of securitized assets. I show that when retaining part of the risk, the issuer of securitized assets may credibly signal its quality. -
December 10, 2014
Exchange-Traded Funds: Evolution of Benefits, Vulnerabilities and Risks
Ian Foucher and Kyle Gray explain the different types of exchange-traded funds (ETFs), which present both benefits and risks for investors. They discuss ways in which the risk characteristics of certain ETF products could have broader implications for the financial system, and describe the evolution of ETF market structure and regulation in different jurisdictions as authorities try to mitigate risks related to ETFs.