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Best friend or worst enemy? : dynamics and multiple equilibria with financial arbitrage, production and collateral constraints
Zhang, Quan - 2017 - Last update: March 23, 2017
We develop a tractable model to study the macroeconomic impacts of limited arbitrage by linking arbitrage activities with the macroeconomy through collateralization. We show that the interactions between speculative trading and the business cycle can work as a powerful transmission mechanism,...
Persistent link: https://www.econbiz.de/10011626467
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Systemic risk and the refinancing ratchet effect
Khandani, Amir E.; Lo, Andrew W.; Merton, Robert C. - 2009 - This draft: September 13, 2009
The confluence of three trends in the U.S. residential housing market - rising home prices, declining interest rates, and near-frictionless refinancing opportunities - led to vastly increased systemic risk in the financial system. Individually, each of these trends is benign, but when they occur...
Persistent link: https://www.econbiz.de/10003889053
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Are Regime Shift Risks Priced in Asset Markets?
Chourdakis, Kyriakos - 2011
In this paper we introduce a discrete time pricing model for a European call option when the log-return of the underlying stock (asset) is subject to discontinuous market regime type of shifts in its mean or volatility whose risk can be priced in the market. The paper shows how to estimate this...
Persistent link: https://www.econbiz.de/10013130931
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Profit Index - Pertinent Risk of Financial Investment
Kauffmann, Amitay - 2012
preferences to lottery outcomes. Ever since the analysis of decision making under uncertainty has again become a major focus of …
Persistent link: https://www.econbiz.de/10013096329
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Factor Investing, Learning from Prices, and Endogenous Uncertainty in Asset Markets
Dim, Chukwuma; Sangiorgi, Francesco; Vilkov, Grigory - 2021
We study learning and uncertainty under the factor investing paradigm using an endogenous information model with …, increasing systematic uncertainty and incentivizing learning about the systematic risk. This learning complementarity leads to … multiple regimes in systematic uncertainty and attention allocation. We specify and estimate a model-based, forward …
Persistent link: https://www.econbiz.de/10013247042
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Estimating the policy rule from money market rates when target rate changes are lumpy
Fontaine, Jean-Sébastien - 2012
Most central banks effect changes to their target or policy rate in discrete increments (e.g., multiples of 0.25%) following public announcements on scheduled dates. Still, for most applications, researchers rely on the assumption that the policy rate changes linearly with economic conditions...
Persistent link: https://www.econbiz.de/10009728132
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Inflation, Business Cycles, and Commodity Investing in Financialized Markets
Zaremba, Adam - 2015
Financialization of commodity markets has been a broadly discussed topic in recent years. However, its implications for commodity investors have not yet been fully explored. This paper concentrates on the macroeconomic determinants of commodity returns in financialized and non-financialized...
Persistent link: https://www.econbiz.de/10013034279
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What Fed funds futures tell us about monetary policy uncertainty
Fontaine, Jean-Sébastien - 2016
The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main … driver of uncertainty is a "path" factor signaling information about future policy actions, which is filtered from federal … funds futures data. The uncertainty is highest when it signals a loosening cycle. The uncertainty raises the risk premium in …
Persistent link: https://www.econbiz.de/10011576374
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On the tail risk premium in the oil market
Ellwanger, Reinhard - 2017
uncertainty measures, suggesting that time-varying oil price fears are an additional source of oil price volatility and …
Persistent link: https://www.econbiz.de/10011778000
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Risk, uncertainty and monetary policy
Bekaert, Geert; Hoerova, Marie; Lo Duca, Marco - 2012
(“uncertainty”), we find that a lax monetary policy decreases both risk aversion and uncertainty, with the former effect being …
Persistent link: https://www.econbiz.de/10011506749