Is This Normal? The Cost of Assuming that Derivatives Have Normal Returns Staff Working Paper 2024-46 Radoslav Raykov Derivatives exchanges often determine collateral requirements, which are fundamental to market safety, with dated risk models assuming normal returns. However, derivatives returns are heavy-tailed, which leads to the systematic under-collection of collateral (margin). This paper uses extreme value theory (EVT) to evaluate the cost of this margin inadequacy to market participants in the event of default. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial stability JEL Code(s): G, G1, G10, G11, G2, G20
November 17, 2016 Commodity Price Supercycles: What Are They and What Lies Ahead? Bank of Canada Review - Autumn 2016 Bahattin Buyuksahin, Kun Mo, Konrad Zmitrowicz Because commodity prices help determine Canada’s terms of trade, employment, income and, ultimately, inflation, it is important to understand what causes them to fluctuate. Since the early 1900s, there have been four commodity price supercycles—which we define as extended periods of boom and bust that can take decades to complete. Now in its downswing phase, the current supercycle started after growth in China and other emerging-market economies in the mid-1990s resulted in an unexpected demand shock. The extent of this downswing depends on numerous factors that are presently uncertain. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C1, Q, Q1, Q4, Q41
Survey of Price-Setting Behaviour of Canadian Companies Staff Working Paper 2006-35 David Amirault, Carolyn Kwan, Gordon Wilkinson In many mainstream macroeconomic models, sticky prices play an important role in explaining the effects of monetary policy on the economy. Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation and prices, Monetary policy transmission JEL Code(s): D, D4, D40, E, E3, E30, L, L1, L11
The Impact of Sovereign Wealth Funds on International Financial Stability Staff Discussion Paper 2008-14 Tamara Gomes Over the recent period, many emerging-market economies and commodity-exporting nations have experienced unprecedented growth and accumulated substantial amounts of foreign exchange reserves. The management of these foreign reserves has led to the emergence of important financial actors: sovereign wealth funds (SWFs). Content Type(s): Staff research, Staff discussion papers Research Topic(s): Financial stability, Recent economic and financial developments JEL Code(s): F, F2, F21, F3, F31, F32, G, G1, G15
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
December 9, 2010 Central Counterparties and Systemic Risk Financial System Review - December 2010 Eric Tuer, Nicholas Labelle, Nikil Chande Content Type(s): Publications, Financial System Review articles
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
Corporate Governance, Product Market Competition and Debt Financing Staff Working Paper 2014-5 Teodora Paligorova, Jun Yang This paper examines the impact of product market competition and corporate governance on the cost of debt financing and the use of bond covenants. We find that more anti-takeover provisions are associated with a lower cost of debt only in competitive industries. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets JEL Code(s): G, G1, G12, G3, G34
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
A Reference Guide for the Business Outlook Survey Staff Discussion Paper 2020-15 David Amirault, Naveen Rai, Laurent Martin The Business Outlook Survey (BOS) has become an important part of monetary policy deliberations at the Bank of Canada and is also well known in Canadian policy and financial circles. This paper compiles more than 20 years of experience conducting the BOS and serves as a comprehensive reference manual. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Firm dynamics, Regional economic developments JEL Code(s): C, C8, C83, D, D2, D22, E, E3, E32