Have Liquidity and Trading Activity in the Canadian Provincial Bond Market Deteriorated? Staff Analytical Note 2018-30 Chen Fan, Sermin Gungor, Guillaume Nolin, Jun Yang In recent years, the liquidity in the secondary market for Canadian provincial bonds was a concern for many market participants. We find that a proxy for the bid-ask spread has deteriorated modestly since 2010. However, a proxy for price impact as well as measures of trade size, the number of trades and turnover have been stable or improved since 2010. This holds for bonds issued by different provinces and for bonds of different ages and sizes. Alberta bonds provide an interesting case study: After the fall in oil prices in 2014–15, the province increased its borrowing in the bond market and its credit rating was downgraded. Yet trading activity for Alberta bonds increased significantly. Overall, we interpret the evidence as a sign of resilience in the provincial bond market. Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets JEL Code(s): G, G1, G12, G14
Should Bank Capital Regulation Be Risk Sensitive? Staff Working Paper 2018-48 Toni Ahnert, James Chapman, Carolyn A. Wilkins We present a simple model to study the risk sensitivity of capital regulation. A banker funds investment with uninsured deposits and costly capital, where capital resolves a moral hazard problem in the banker’s choice of risk. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial system regulation and policies JEL Code(s): G, G2, G21, G28
September 17, 2018 CARR Meeting (September 17, 2018) Content Type(s): Meetings Source(s): Canadian Alternative Reference Rate Working Group
Challenges in Implementing Worst-Case Analysis Staff Working Paper 2018-47 Jon Danielsson, Lerby Ergun, Casper G. de Vries Worst-case analysis is used among financial regulators in the wake of the recent financial crisis to gauge the tail risk. We provide insight into worst-case analysis and provide guidance on how to estimate it. We derive the bias for the non-parametric heavy-tailed order statistics and contrast it with the semi-parametric extreme value theory (EVT) approach. Content Type(s): Staff research, Staff working papers Topic(s): Financial stability JEL Code(s): C, C0, C01, C1, C14, C5, C58
September 13, 2018 Bank of Canada Conference on Central Bank Communications Workshop held on September 13 and 14, 2018. Content Type(s): Conferences and workshops