From a financial standpoint, the mechanics of the carry trade has been recently examined in Brunnermeier et al. (2009). They showed that shocks to interest rate differentials lead to carry trade activity and to significant reactions in the bilateral exchange rates vis-a-vis the US dollar that...

This paper investigates the relationship between futures prices and financial investments in derivatives of the main agricultural commodities. We first provide a broad picture of how these markets function and how they have evolved, showing that traders who deal mostly in commodity index...

This paper analyzes the impact of news on several Italian financial variables, paying particular attention to the effect on the conditional volatility of these variables. The analysis spans a period of great financial and political turbulence in Italy, including the rapid succession of three...

This paper explores the implications of systemic risk in Credit Structured Finance (CSF). Risk measurement issues loomed large during the 2007-08 financial crisis, as the massive, unprecedented number of downgrades of AAA senior bond tranches inflicted severe losses on banks, calling into...

Theory suggests that uninsurable income risk induces individuals to accumulate assets as a precautionary reserve of value. Most assets, however, bear rate of return risk, that can be diversified only if every asset is traded by a large number of individuals and arbitrage is frictionless. Using...

This paper proposes a Bayesian regression model with time-varying coefficients (TVC) that makes it possible to estimate jointly the degree of instability and the time-path of regression coefficients. Thanks to its computational tractability, the model proves suitable to perform the first (to our...

This paper deals with the usefulness of several measures of financial spreads (the slope of the yield curve, the reverse yield gap, the credit quality spread) for fore-casting real economic activity and inflation in the euro area. A quarterly Bayesian vector autoregression model is used to...

A two-country model that incorporates many features proposed in the New Open Economy Macroeconomics literature is developed in order to replicate the volatility of the real exchange rate and its disconnect with macroeconomic variables. The model is estimated using data for the euro area and the...

We assess the impact of oil shocks on euro-area macroeconomic variables by estimating a new-Keynesian small open economy model with Bayesian methods. Oil price is determined according to supply and demand conditions in the world oil market. We find that the impact of an increase in the price of...

The revised Basel Capital Accord requires banks to meet a capital requirement for operational risk as part of an overall risk-based capital framework. Three distinct options for calculating operational risk charges are proposed (Basic Approach, Standardised Approach, Advanced Measurement...