Search Results
Journal Article
Asset building and the wealth gap
Building and maintaining financial security is increasingly difficult for a growing portion of American households. Wealth is less prevalent in middle-class households and increasing among the already well-to-do. At the same time, poverty is growing and concentrating disproportionately among the nonwhite population. As the cost of living outpaces income and wealth accumulation, a majority of U.S. households are ill-prepared for financial emergencies or retirement.
Report
Why are Switzerland's foreign assets so low? The growing financial exposure of a small open economy
Switzerland's international investment position shows a puzzling feature since 1999: Large and persistent current account surpluses have failed to boost the value of Swiss foreign assets. In this paper, we link this pattern to the substantial increase in the leveraging of Switzerland's international assets and liabilities over the last twenty years, which we document in detail. We estimate the impact of exchange rate and asset prices movements on Swiss net foreign assets, and show that they led to substantial valuations losses since 1999, accounting for between one-quarter and one-half of the ...
Journal Article
Robust capital regulation
Regulators and markets can find the balance sheets of large financial institutions difficult to penetrate, and they are mindful of how undercapitalization can create incentives to take on excessive risk. This study proposes a novel framework for capital regulation that addresses banks' incentives to take on excessive risk and leverage. The framework consists of a special capital account in addition to a core capital requirement. The special account would accrue to a bank's shareholders as long as the bank is solvent, but would pass to the bank's regulators?rather than its creditors?if the ...
Speech
Asset bubbles and the implications for central bank policy
Remarks at The Economic Club of New York, New York City.
Working Paper
Modelling the MIB30 implied volatility surface. Does market efficiency matter?
We analyze the volatility surface vs. moneyness and time to expiration implied by MIBO options written on the MIB30, the most important Italian stock index. We specify and fit a number of models of the implied volatility surface and find that it has a rich and interesting structure that strongly departs from a constant volatility, Black-Scholes benchmark. This result is robust to alternative econometric approaches, including generalized least squares approaches that take into account both the panel structure of the data and the likely presence of heteroskedasticity and serial correlation in ...
Speech
Federal Reserve lending disclosure
Testimony of Thomas C. Baxter, Jr., and Scott G. Alvarez, General Counsel of the Board of Governors, before the Subcommittee on Domestic Monetary Policy and Technology, Committee on Financial Services, U.S. House of Representatives, Washington, D.C.
Journal Article
Liquid asset holdings of individuals and businesses
Working Paper
Measuring financial asset return and volatility spillovers, with application to global equity markets
The authors provide a simple and intuitive measure of interdependence of asset returns and/or volatilities. In particular, they formulate and examine precise and separate measures of return spillovers and volatility spillovers. The authors framework facilitates study of both noncrisis and crisis episodes, including trends and bursts in spillovers, and both turn out to be empirically important. In particular, in an analysis of 19 global equity markets from the early 1990s to the present, they find striking evidence of divergent behavior in the dynamics of return spillovers vs. volatility ...
Speech
The implementation of current asset purchases
Remarks at the Annual Meeting with Primary Dealers, New York City.
Report
Funding liquidity risk and the cross-section of stock returns
We derive equilibrium pricing implications from an intertemporal capital asset pricing model where the tightness of financial intermediaries? funding constraints enters the pricing kernel. We test the resulting factor model in the cross-section of stock returns. Our empirical results show that stocks that hedge against adverse shocks to funding liquidity earn lower average returns. The pricing performance of our three-factor model is surprisingly strong across specifications and test assets, including portfolios sorted by industry, size, book-to-market, momentum, and long-term reversal. ...