Dealer balance sheets and market liquidity

Even in a huge market like U.S. fixed income, dealer balance sheet management these days can impair liquidity. New Federal Reserve research suggests that...

Some stylized facts of FX liquidity

A paper of the University of St. Gallen shows that foreign exchange liquidity has been highly correlated across currency pairs, apparently more so than...

The power of global financial cycles

There is theoretical reason and empirical evidence for a single global financial cycle driving capital flows across a wide range of markets. Federal Reserve...

Credit market herding and price distortions

Corporate credit markets have historically been especially prone to herding. The main drivers of herding have been past returns, rating changes and liquidity. Sell...

How fear of disaster affects financial markets

Fear of economic disasters, such as depressions, is more frequent than their actual occurrence. People tend to perceive a growing risk of disaster as...

The rise of asset management

Bank of England's Andrew Haldane has summarized the rise and risks of asset management in a recent speech. As demographics and economic development propel...

Volatility markets: a practitioner’s view

Christopher Cole argues that volatility markets are about trading both known and unknown risks. These risks require different pricing and cause different "crashes". Most...

On the vulnerability of local emerging debt markets

A new IMF paper provides evidence that increased foreign participation in local-currency emerging debt markets has made these significantly more vulnerable to foreign interest rate and risk...

Why and when financial markets are herding

Herding arises from deliberate decisions of informed traders to follow others. It can create inefficiency, dislocations and, hence, profit opportunities. A paper by German...

How nominal interest rates can become deeply negative

A recent IMF paper suggests that sizeable negative policy rates could be implemented in developed economies. The key would be a variable deposit fee...

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