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Data on the use of government securities in the repo, securities lending and cash markets suggest there are bond market clienteles in Canada. Shorter-term bonds are more prevalent in the repo market, while longer-maturity securities are more active in the securities lending market—consistent with the preferred habitat hypothesis. These results could help design better debt-management strategies and more-effective policies to maintain well-functioning financial markets.

The Big Six Canadian banks are a dominant component of the Canadian financial system. How they finance their business activities is fundamental to how effective they are. Retail and commercial deposits along with wholesale funding represent the two major sources of funds for Canadian banks. What wholesale funding instruments do the Big Six banks use? How do they choose between different funding sources, funding strategies and why? How have banks changed their funding mix since the 2007–09 global financial crisis?

The spread between the yield of a corporate bond and the yield of a similar Government of Canada bond reflects compensation for possible default by the issuing firm and compensation for additional risks beyond default.

This paper investigates how a low or negative overnight interest rate might affect the Canadian repo markets. The main conclusion is that the repo market for general collateral will continue to function effectively.

The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main driver of uncertainty is a “path” factor signaling information about future policy actions, which is filtered from federal funds futures data.

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.

We study a cross section of carry-trade-generated currency excess returns in terms of their exposure to global fundamental macroeconomic risk.

This report investigates how the markets for repurchase agreements and securities-lending agreements support the liquidity of Canadian bond markets. It also discusses how recent regulatory changes, as well as low interest rates and settlement failures, are potentially affecting securities-financing markets and, as a result, bond market liquidity.

We introduce a new framework that facilitates term structure modeling with both positive interest rates and flexible time-series dynamics but that is also tractable, meaning amenable to quick and robust estimation.

Under very general conditions, the total quadratic variation of a jump-diffusion process can be decomposed into diffusive volatility and squared jump variation. We use this result to develop a new option valuation model in which the underlying asset price exhibits volatility and jump intensity dynamics.