Financial markets

• Implications of Asymmetry Risk for Portfolio Analysis and Asset Pricing

  Staff Working Paper 2007-47 Fousseni Chabi-Yo, Dietmar Leisen, Eric Renault

  Asymmetric shocks are common in markets; securities' payoffs are not normally distributed and exhibit skewness. This paper studies the portfolio holdings of heterogeneous agents with preferences over mean, variance and skewness, and derives equilibrium prices.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Market structure and pricing JEL Code(s): C, C5, C52, D, D5, D58, G, G1, G11, G12

• Price Discovery in Canadian and U.S. 10-Year Government Bond Markets

  Staff Working Paper 2007-43 Bryan Campbell, Scott Hendry

  This paper presents some new results on the price discovery process in both the Canadian and U.S. 10-year Government bond markets using high-frequency data not previously analyzed. Using techniques introduced by Hasbrouck (1995) and Gonzalo-Granger (1995), we look at the relative information content of cash and futures prices in the market for Canadian Government bonds using futures market data from the Montreal Exchange and OTC cash market data reflecting the inter-dealer market covered by CanPx.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Market structure and pricing JEL Code(s): G, G1, G12, G13, G14

• Family Values: Ownership Structure, Performance and Capital Structure of Canadian Firms

  Staff Working Paper 2007-40 Michael R. King, Eric Santor

  This study examines how family ownership affects the performance and capital structure of 613 Canadian firms using a panel dataset from 1998 to 2005.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, International topics JEL Code(s): G, G1, G12, G15

• Price Formation and Liquidity Provision in Short-Term Fixed Income Markets

  Staff Working Paper 2007-27 Chris D'Souza, Ingrid Lo, Stephen Sapp

  Differences in market structures may affect the manner in which fundamental information is incorporated into prices. High levels of quote and trade transparency plus substantial quoting obligations in European government securities markets ensure that prices are informationally efficient.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Interest rates, Market structure and pricing JEL Code(s): G, G1, G12, G14, G15

• Managing Adverse Dependence for Portfolios of Collateral in Financial Infrastructures

  Staff Working Paper 2007-25 Alejandro García, Ramazan Gençay

  We propose a framework that allows a portfolio manager to quantify the probability of simultaneous losses in multiple assets of a collateral portfolio. Using this framework, we propose a methodology to conduct stress tests on the market value of the portfolio of collateral when undesirable extreme dependence occurs.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets, Financial stability JEL Code(s): C, C1, C10, G, G0, G00, G1, G10

• Order Aggressiveness and Quantity: How Are They Determined in a Limit Order Market?

  Staff Working Paper 2007-23 Ingrid Lo, Stephen Sapp

  Dealers trading in a limit order market must choose both the order aggressiveness and the quantity for their orders. We empirically investigate how dealers jointly make these decisions in the foreign exchange market using a unique simultaneous equations model.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Financial markets JEL Code(s): G, G1, G14

• A No-Arbitrage Analysis of Macroeconomic Determinants of Term Structures and the Exchange Rate

  Staff Working Paper 2007-21 Fousseni Chabi-Yo, Jun Yang

  We study the joint dynamics of macroeconomic variables, bond yields, and the exchange rate in an empirical two-country New-Keynesian model complemented with a no-arbitrage term structure model. With Canadian and US data, we are able to study the impact of macroeconomic shocks from both countries on their yield curves and the exchange rate.

  Content Type(s): Staff research, Staff working papers Topic(s): Debt management, Econometric and statistical methods, Exchange rates, Financial markets, Interest rates JEL Code(s): E, E1, E12, E4, E43, F, F4, F41, G, G1, G12, G15

• Multivariate Realized Stock Market Volatility

  Staff Working Paper 2007-20 Gregory Bauer, Keith Vorkink

  We present a new matrix-logarithm model of the realized covariance matrix of stock returns. The model uses latent factors which are functions of both lagged volatility and returns.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): C, C3, C32, C5, C53, G, G1, G14

• Optimization in a Simulation Setting: Use of Function Approximation in Debt Strategy Analysis

  Staff Working Paper 2007-13 David Bolder, Tiago Rubin

  The stochastic simulation model suggested by Bolder (2003) for the analysis of the federal government's debt-management strategy provides a wide variety of useful information. It does not, however, assist in determining an optimal debt-management strategy for the government in its current form.

  Content Type(s): Staff research, Staff working papers Topic(s): Debt management, Econometric and statistical methods, Financial markets, Fiscal policy JEL Code(s): C, C0, C1, C14, C15, C5, C51, C52, C6, C61, C65, E, E6, G, G1, H, H6, H63

• Uncollateralized Overnight Loans Settled in LVTS

  Staff Working Paper 2007-11 Scott Hendry, Nadja Kamhi

  Loan-level data on the uncollateralized overnight loan market is generated using payment data from Canada's Large Value Transfer System (LVTS) and a modified version of the methodology proposed in Furfine (1999). There were on average just under 100 loans extended in this market each day from March 2004 to March 2006 for a total daily value of about $5 billion.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Interest rates JEL Code(s): E, E4, E44, E5, E50, G, G1, G12