Financial stability
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Managing Adverse Dependence for Portfolios of Collateral in Financial Infrastructures
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. -
Firms Dynamics, Bankruptcy Laws and Total Factor Productivity
This paper analyzes endogenous fluctuations in total factor productivity (TFP) in a dynamic general equilibrium model with heterogeneous agents, and illustrates the interaction of credit market frictions, asset prices, the entry and exit of firms, and fluctuations in TFP in response to firm-level productivity and aggregate credit-market shocks. I also analyze the effect of bankruptcy and foreclosure laws on fluctuations in TFP through their effect on credit market frictions. -
Do We Need the IMF to Resolve a Crisis? Lessons from Past Episodes of Debt Restructuring
This study investigate how debt restructurings have evolved over the decades. Debtors and creditors have a long history of engaging an outsider – a “third party”, such as the IMF – to organise and facilitate debt restructurings. -
Stress Testing the Corporate Loans Portfolio of the Canadian Banking Sector
Stress testing, at its most general level, is an investigation of the performance of an entity under abnormal operating conditions. -
The Role of Debt and Equity Finance over the Business Cycle
The authors show that debt and equity issuance are procyclical for most listed U.S. firms. -
Linking Real Activity and Financial Markets: The Bonds, Equity, and Money (BEAM) Model
The authors estimate a small monthly macroeconometric model (BEAM, for bonds, equity, and money) of the Canadian economy built around three cointegrating relationships linking financial and real variables over the 1975–2002 period. -
Risk-Cost Frontier and Collateral Valuation in Securities Settlement Systems for Extreme Market Events
The authors examine how the use of extreme value theory yields collateral requirements that are robust to extreme fluctuations in the market price of the asset used as collateral. -
An Empirical Analysis of Foreign Exchange Reserves in Emerging Asia
Over the past few years, the ability of the United States to finance its current account deficit has been facilitated by massive purchases of U.S. -
Pocket Banks and Out-of-Pocket Losses: Links between Corruption and Contagion
The author describes a model with a corrupt banking system, in which bankers knowingly lend at market interest rates to back projects riskier than the market rate indicates.