Will exchange-traded funds shape the future of bond dealing? Staff Analytical Note 2020-16 Rohan Arora, Jean-Sébastien Fontaine, Corey Garriott, Guillaume Ouellet Leblanc Bond dealers have traditionally kept bonds in an inventory until clients buy them. But now, dealers have another way to access bonds for their clients: the exchange-traded fund. We discuss this new way to manage bond dealing and what it might mean for bond markets. Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets, Financial stability, Market structure and pricing JEL Code(s): G, G1, G2, G20, G23
Dynamic Competition in Negotiated Price Markets Staff Working Paper 2020-22 Jason Allen, Shaoteng Li Repeated interactions between borrowers and lenders create the possibility of dynamic pricing: lenders compete aggressively with low prices to attract new borrowers and then raise their prices once borrowers have made a commitment. We find such pricing patterns in the Canadian mortgage market. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial services, Market structure and pricing JEL Code(s): D, D4, G, G2, G21, L, L2
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 Topic(s): Financial institutions, Financial markets, Market structure and pricing JEL Code(s): G, G1, G14, G2, G20, L, L1
The Market for Acquiring Card Payments from Small and Medium-Sized Canadian Merchants Staff Discussion Paper 2020-5 Angelika Welte, Jozsef Molnar This note uses industry data and a unique dataset of small and medium-sized merchants to provide insights into the acquirer-merchant market in Canada. Content Type(s): Staff research, Staff discussion papers Topic(s): Financial services, Market structure and pricing, Payment clearing and settlement systems JEL Code(s): C, C2, D, D2, E, E4, E42
May 20, 2020 Decisive actions in difficult times Speech summary Timothy Lane CFA Society Winnipeg and the Manitoba Association for Business Economics Winnipeg, Manitoba Deputy Governor Timothy Lane talks about the Bank’s decisive actions in response to COVID-19, and how these will help Canadians now and in the future. Content Type(s): Press, Speeches and appearances, Speech summaries Topic(s): Coronavirus disease (COVID-19), Credit and credit aggregates, Credit risk management, Domestic demand and components, Financial institutions, Financial markets, Financial services, Financial stability, Fiscal policy, Housing, Inflation and prices, Inflation targets, Interest rates, International financial markets, Labour markets, Lender of last resort, Market structure and pricing, Monetary policy, Monetary policy and uncertainty, Monetary policy implementation, Monetary policy transmission, Productivity, Recent economic and financial developments, Service sector, Trade integration
May 20, 2020 Policies for the Great Global Shutdown and Beyond Remarks (delivered virtually) Timothy Lane CFA Society Winnipeg and Manitoba Association for Business Economics Winnipeg, Manitoba Deputy Governor Timothy Lane explains how the Bank is helping Canadian households and businesses weather the COVID-19 crisis, and how our actions today are laying a solid foundation for our future economic recovery. Content Type(s): Press, Speeches and appearances, Remarks Topic(s): Coronavirus disease (COVID-19), Credit and credit aggregates, Credit risk management, Domestic demand and components, Financial institutions, Financial markets, Financial services, Financial stability, Fiscal policy, Housing, Inflation and prices, Inflation targets, Interest rates, International financial markets, Labour markets, Lender of last resort, Market structure and pricing, Monetary policy, Monetary policy and uncertainty, Monetary policy implementation, Monetary policy transmission, Productivity, Recent economic and financial developments, Service sector, Trade integration
A Simple Method for Extracting the Probability of Default from American Put Option Prices Staff Working Paper 2020-15 Bo Young Chang, Greg Orosi A put option is a financial contract that gives the holder the right to sell an asset at a specific price by (or at) a specific date. A put option can therefore provide its holder insurance against a large drop in the stock price. This makes the prices of put options an ideal source of information for a market-based measure of the probability of a firm’s default. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Market structure and pricing JEL Code(s): G, G1, G13, G3, G33
Multi-Product Pricing: Theory and Evidence from Large Retailers in Israel Staff Working Paper 2020-12 Marco Bonomo, Carlos Carvalho, Oleksiy Kryvtsov, Sigal Ribon, Rodolfo Rigato Standard theories of price adjustment are based on the problem of a single-product firm, and therefore they may not be well suited to analyze price dynamics in the economy with multiproduct firms. Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, Market structure and pricing, Monetary policy JEL Code(s): D, D2, D21, D22, E, E3, E31, E5, E52, L, L1, L11
Optimal Taxation in Asset Markets with Adverse Selection Staff Working Paper 2020-11 Mohammad Davoodalhosseini What is the optimal tax schedule in over-the-counter markets, e.g., those for corporate bonds? I find that an optimal tax schedule is often non-monotonic. For example, trading of some high-price assets should be subsidized, and trading of some low-price assets should be taxed. Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial markets, Financial system regulation and policies, Market structure and pricing JEL Code(s): D, D8, D82, D83, E, E2, E24, G, G1, G10, J, J3, J31, J6, J64
Do Protectionist Trade Policies Integrate Domestic Markets? Evidence from the Canada-U.S. Softwood Lumber Dispute Staff Working Paper 2020-10 Jinggang Guo, Craig Johnston We consider the effects of protectionist trade policies on international and domestic market integration, using evidence from the long-standing softwood lumber trade dispute between Canada and the United States. Content Type(s): Staff research, Staff working papers Topic(s): International topics, Market structure and pricing, Trade integration JEL Code(s): F, F1, F13, Q, Q1, Q17