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This paper provides a novel methodology for estimating option pricing models based on risk-neutral moments. We synthesize the distribution extracted from a panel of option prices and exploit linear relationships between risk-neutral cumulants and latent factors within the continuous time affine stochastic volatility framework.

This paper studies how a central bank should design a CBDC when private payment providers collect and monetize transaction data. It characterizes the optimal CBDC’s pricing and data policy, and shows how its effects on private payment use and total data depend on market power and data externalities.

This paper examines the relationship between volatility shocks and preference shocks in an analytically tractable endogenous growth model with recursive preferences and stochastic volatility. I show that there exists an explicit mapping between volatility shocks and preference shocks, and a rise in volatility generates the same impulse responses of macroeconomic aggregates as a negative preference shock.

This paper examines inefficiencies arising from a lack of long-term contracting in small business lending in China.

We study how different types of monetary policy shape the distributional effects of external economic shocks on households’ consumption in a small open economy. Our results present a trade-off between maintaining overall stabilization and controlling consumption inequality.

We document countercyclical corporate saving behavior with the degree of countercyclicality varying nonmonotonically with firm size. We then develop a dynamic stochastic general equilibrium model with heterogeneous firms to explain the pattern and study its implications for business cycles.

Specifications of the Federal Reserve target rate that have more realistic features mitigate in-sample over-fitting and are favored in the data.

Cash gives users a high level of privacy when making payments, but the use of cash to make payments is declining. People increasingly use debit cards, credit cards or other methods to pay.

This paper develops a stress-testing framework in which banks strategically adjust their balance sheets in response to regulatory constraints and market conditions. Applied to Canada’s largest banks, it quantifies the effects of macroprudential policies on lending and identifies systemic vulnerabilities through reverse stress testing.

We build a network formation game of firms with trade flows to study the adoption and usage of a new digital currency as an alternative to correspondent banking.