A Stochastic Volatility Model with Conditional Skewness Staff Working Paper 2011-20 Bruno Feunou, Roméo Tedongap We develop a discrete-time affine stochastic volatility model with time-varying conditional skewness (SVS). Importantly, we disentangle the dynamics of conditional volatility and conditional skewness in a coherent way. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Econometric and statistical methods JEL Code(s): C, C1, C5, G, G1, G12
Managerial Compensation Duration and Stock Price Manipulation Staff Working Paper 2015-25 Josef Schroth I build a model of optimal managerial compensation where managers each have a privately observed propensity to manipulate short-term stock prices. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Labour markets, Recent economic and financial developments JEL Code(s): D, D8, D82, G, G1, G14, G3, G30, M, M1, M12
Exchange Rate Regimes, Globalisation, and the Cost of Capital in Emerging Markets Staff Working Paper 2007-29 Antonio Diez de los Rios This paper presents a multifactor asset pricing model for currency, bond, and stock returns for ten emerging markets to investigate the effect of the exchange rate regime on the cost of capital and the integration of emerging financial markets. Since there is evidence that a fixed exchange rate regime reduces the currency risk premia demanded by foreign investors, the tentative conclusion is that a fixed exchange rate regime system can help reduce the cost of capital in emerging markets. Content Type(s): Staff research, Staff working papers Research Topic(s): Development economics, Exchange rate regimes JEL Code(s): F, F3, F30, F33, G, G1, G15
Time-Varying Crash Risk: The Role of Stock Market Liquidity Staff Working Paper 2016-35 Peter Christoffersen, Bruno Feunou, Yoontae Jeon, Chayawat Ornthanalai We estimate a continuous-time model with stochastic volatility and dynamic crash probability for the S&P 500 index and find that market illiquidity dominates other factors in explaining the stock market crash risk. While the crash probability is time-varying, its dynamic depends only weakly on return variance once we include market illiquidity as an economic variable in the model. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Econometric and statistical methods, Financial stability JEL Code(s): G, G0, G01, G1, G12
May 13, 2014 Measuring Uncertainty in Monetary Policy Using Realized and Implied Volatility Bank of Canada Review - Spring 2014 Bo Young Chang, Bruno Feunou Uncertainty surrounding the Bank of Canada’s future policy rates is measured using implied volatility computed from interest rate options and realized volatility computed from intraday prices of interest rate futures. Both volatility measures show that uncertainty decreased following major policy actions taken by the Bank in response to the 2007–09 financial crisis. Findings also indicate that, on average, uncertainty decreases following the Bank’s policy rate announcements. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Monetary policy and uncertainty JEL Code(s): E, E5, E52, E58
Considerations for the allocation of non-default losses by financial market infrastructures Staff Analytical Note 2022-16 Daniele Costanzo, Radoslav Raykov Non-default losses of financial market infrastructures (FMIs) have gained attention due to their potential impacts on FMIs and FMI participants, and the lack of a common approach to address them. A key question is, who should absorb these losses? Content Type(s): Staff research, Staff analytical notes Research Topic(s): Financial markets, Financial system regulation and policies JEL Code(s): G, G2, G23, G28, G3, G32, G33
An Economic Perspective on Payments Migration Staff Working Paper 2020-24 Anneke Kosse, Zhentong Lu, Gabriel Xerri Consumers, businesses and banks make millions of payments each day using a variety of instruments, such as debit cards, cheques and wires. Canada is currently developing three new systems to process these transactions: Lynx, Settlement Optimization Engine (SOE) and Real-Time Rail (RTR). Content Type(s): Staff research, Staff working papers Research Topic(s): Financial services, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): E, E4, E42, G, G2, G21
November 19, 2015 A Survey of Consumer Expectations for Canada Bank of Canada Review - Autumn 2015 Marc-André Gosselin, Mikael Khan The Bank of Canada recently launched a quarterly survey to measure the expectations of Canadian households: the Canadian Survey of Consumer Expectations (CSCE). The data collected provide comprehensive information about consumer expectations for and uncertainty about inflation, the labour market and household finance. This article describes the CSCE and illustrates its potential to offer rich information about Canadian consumers for researchers and policy-makers. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Central bank research, Housing, Inflation and prices, Interest rates, Labour markets, Monetary policy and uncertainty JEL Code(s): D, D1, D12, D8, D84, E, E3, E31, E5, E52, J, J0
Trading on Long-term Information Staff Working Paper 2020-20 Corey Garriott, Ryan Riordan Investors who trade based on good research are said to be the backbone of stock markets: They conduct research to discover the value of stocks and, through their trading, guide financial prices to reflect true value. What can make their job difficult is that high-speed, short-term traders could use machine learning and other technologies to infer when informed investors are trading. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial markets, Market structure and pricing JEL Code(s): G, G1, G14, G2, G20, L, L1
Forecasting the Real Price of Oil in a Changing World: A Forecast Combination Approach Staff Working Paper 2013-28 Christiane Baumeister, Lutz Kilian The U.S. Energy Information Administration regularly publishes short-term forecasts of the price of crude oil. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, E, E3, E32, Q, Q4, Q43