Shengwu Du and Travis D. NesmithFiltered historical simulation (FHS)—a simple method of calculating Value-at-Risk that reacts quickly to changes in market volatility—is a popular method for calculating margin at central counterparties. However, FHS does not address how correlation can vary through time.
Mark Carlson and Mary-Frances StyczynskiThe Federal Reserve’s discount window is a tool that can provide reserves to banks at a rate set by the Federal Reserve, the discount rate. During the past several years, there have been large fluctuations in the level of reserves in the banking system and in the level discount rate relative to other interest rates.
Andrew Meldrum, Oleg SokolinskiyAnalysis of market liquidity often focuses on measures of the current cost of trading. However, investors and policy-makers also care about what would happen to liquidity in the event of an adverse shock.
Ruth JudsonThe incidence of currency counterfeiting and the possible total stock of counterfeits in circulation are popular topics of speculation and discussion in the press and are of substantial practical interest to the Federal Reserve, the U.S. Treasury and the United States Secret Service (USSS), who are jointly responsible for U.S. banknote design, including security features, and production.
Jin-Wook Chang, Elizabeth Klee, and Vladimir YankovWe develop a model of the repo market with strategic interactions among dealers who compete for funding in a decentralized over-the-counter market and have access to a centrally cleared interdealer market.
James Lovejoy, Tarakaram Gollamudi, Jeremy Kassis, Narayanan Pillai, Jeremy Brotherton, and Eric ThompsonModern payments systems are critical infrastructure for the US and global economy, and they all utilize computing systems to facilitate transactions. These computing systems can be vulnerable to failures and an outage of a payment system could cause a serious ripple effect throughout the economy it supports.
Paul E. SotoThis paper introduces a novel measure of firm-level Artificial Intelligence (AI) Research & Development—the AIR Index—derived from the semantic similarity between earnings conference call transcripts and leading AI research papers. The AIR Index varies widely across industries, with sustained strength in computer and electronic manufacturing, and accelerating growth in computing infrastructure and educational services seen after the introduction of ChatGPT in November 2022.
Swapan-Kumar Pradhan, Viktors Stebunovs, Előd Takáts, and Judit TemesvaryWe use bilateral cross-border bank claims by nationality to assess the effects of geopolitics on cross-border bank flows. We show that a rise in geopolitical tensions between countries — disagreements in UN voting, broad sanctions, or sentiments captured by geopolitical risk indices — significantly dampens cross-border bank lending.
Kabir Dasgupta, Fatimah Shaalan, and Mike ZabekThe annual Survey of Household Economics and Decisionmaking (SHED) receives substantial research attention for topics related to household finances and economic well-being. To assess the reliability of data from the SHED, we compare aggregate statistics from the SHED with prominent, nationally representative surveys that use different survey designs, sample methodologies, and interview modes.
Chris AndersonRegulating bank risk-taking is challenging since banks know more than regulators about the risks of their portfolios and can make adjustments to game regulations. To address this problem, I build a tractable model that incorporates this information asymmetry. The model is flexible enough to encompass many regulatory tools, although I focus on taxes. These taxes could also be interpreted as reflecting the shadow costs of other regulations, such as capital requirements.
