The impact of regulatory reform on money markets
A new CGFS paper suggests that bank regulatory capital and liquidity changes may reduce liquidity in money markets, create steeper short-term yield...
Why decision makers are unprepared for crises
An ECB working paper explains formally why senior decision makers are unprepared for crises: they can only process limited quantities of information and rationally...
How U.S. mutual funds reallocate assets
An empirical study shows that U.S. mutual funds take two major allocation decisions: bonds versus equity and U.S. versus non-U.S. assets. Federal Reserve policy...
The Federal Reserve’s increased influence on financial markets
A new empirical study suggests that the Federal Reserve has exerted a stronger influence on fixed income, commodity, and currency markets since it started...
Why and when “equity duration” matters
A new HSBC report suggests that if and when Quantitative Easing is being reversed it could be a watershed event for sectoral equity performance....
The risks in statistical risk measures
A DNB paper warns that financial market risk models (such as value-at-risk or expected shortfall) are unreliable. Small variations in assumptions cause large differences...
How real money funds could destabilize bond markets
A paper by Feroli, Kashyap, Schoneholtz and Shin illustrates how unlevered funds can become a source of asset price momentum due to peer pressure...
The ECB’s quantitative and qualititative easing
The ECB has introduced a set of new policies that emulate quantitative and qualitative easing. Key measures are targeted long-term repo operations, asset-backed securities purchases,...
How the Fed has reduced the risk of “convexity events”
A New York Fed blog post revisits the self-reinforcing dynamics in long-term U.S. interest rates, resulting from the dynamic hedging of MBS positions (see...
The danger of volatility feedback loops
There is evidence that the financial system has adapted to low fixed income yields through an expansion of explicit and implicit short volatility strategies....
RECENT ARTICLES
FX carry strategies (part 2): Hedging
There is often a strong case for hedging FX carry trades against unrelated global market factors. It is usually not difficult to hedge currency...
FX carry strategies (part 1)
FX forward-implied carry is a valid basis for investment strategies because it is related to policy subsidies and risk premia. However, it also contains...
A simple rule for exchange rate trends
Over the past decades developed market exchange rates have displayed two important regularities. First, real exchange rates (nominal exchange rates adjusted for domestic price...