Search Results
How do reciprocal deposit networks interact with deposit insurance?
Reciprocal deposit networks are designed to increase the total amount eligible for FDIC deposit insurance. In recent years, growth of the networks has accelerated, prompting a re-evaluation of the existing deposit insurance framework and raising at least three questions.
Tokenized deposits use blockchain structure in traditional banking framework
Commercial banks have begun exploring adoption of tokenized deposits, traditional deposits that rely on blockchain technology and allow payments to settle almost instantaneously.
Blockchain Technology Aims to Expand Role of Digital Transactions on Internet
While the resources devoted to blockchain technology development have increased dramatically the past few years, the technology’s ultimate success depends on whether blockchain protocols can interact with the current economic landscape and how that occurs.
Decentralized finance proposed as alternative to traditional financial services
DeFi applications allow users to directly interact with each other to borrow, lend, insure and exchange digital assets without centralized intermediaries, such as banks and custodial exchanges.
Reciprocal deposit networks provide means to exceed FDIC’s $250,000 account cap
Because of their prominence, reciprocal deposits are important in the broader discussion of deposit insurance. Though they have the potential to increase banks’ moral hazard, they also bring increased trust and safety to the banking system.
Innovation promises efficiencies in remittances, if regulation can keep up
As payments technologies evolve faster than the rules governing them, understanding both the mechanics and policy trade-offs of cross-border transfers is increasingly important.
Keeping bank depositors still comes down to rates
How does a bank attract deposits and remain competitive when rates fluctuate and depositors are increasingly mobile? Managing the bank deposit franchise is a cornerstone of bank profitability and stability, and doing so has been challenging during the rapid rise in interest rates in 2022 and the subsequent regional banking turmoil.
Working Paper
Empirical Bayes Control of the False Discovery Exceedance
In sparse large-scale testing problems where the false discovery proportion (FDP) is highly variable, the false discovery exceedance (FDX) provides a valuable alternative to the widely used false discovery rate (FDR). We develop an empirical Bayes approach to controlling the FDX. We show that for independent hypotheses from a two-group model and dependent hypotheses from a Gaussian model fulfilling the exchangeability condition, an oracle decision rule based on ranking and thresholding the local false discovery rate (lfdr) is optimal in the sense that the power is maximized subject to FDX ...
Working Paper
Endogenous Option Pricing
We show that a structural model of firm decisions can produce very flexible implied volatility surfaces: upward and downward sloping, u-shaped. A calibrated version of the model is able to match many unconditional financial characteristics of the average option-able stock, and can help explain how, contrary to simple economic intuition, more valuable growth and contraction options are associated with a more negatively sloped implied volatility curve (i.e., a more negatively skewed implied distribution).
Working Paper
Are Equity Option Returns Abnormal? IPCA Says No
We show that much of the profitability in equity option return strategies, which try to capture option mispricing by taking exposure to underlying volatility, can be explained by an IPCA model. The alpha reduction, relative to competing static factor models, is between 50% and 75% depending on the computing model and the type of option position.