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Journal Article
Hedging interest rate risk with financial futures: some basic principles
Belongia, Michael T.; Santoni, G. J. (1984-10)
Review , Volume 66 , Issue Oct , Pages 15-25

Conference Paper
Hedging bank liquidity risk
Schuermann, Til; Strahan, Philip E.; Gatev, Evan (2006)
Liquidity risk in banking has been attributed to transactions deposits and their potential to spark runs or panics. We show instead that transactions deposits help banks hedge liquidity risk from unused loan commitments. Bank stock-return volatility increases with unused commitments, but the increase is smaller for banks with high levels of transactions deposits. This deposit-lending risk management synergy becomes more powerful during periods of tight liquidity, when nervous investors move funds into their banks. Our results reverse the standard notion of liquidity risk at banks, where runs ...
Proceedings , Paper 1024

Report
Traders' broker choice, market liquidity and market structure
Sarkar, Asani; Chakravarty, Sugato (1997)
Hedgers and a risk-neutral informed trader choose between a broker who takes a position in the asset (a capital broker) and a broker who does not (a discount broker). The capital broker exploits order flow information to mimic informed trades and offset hedgers' trades, reducing informed profits and hedgers' utility. But the capital broker has a larger capacity to execute hedgers' orders, increasing market depth. In equilibrium, hedgers choose the broker with the lowest price per unit of utility while the informed trader chooses the broker with the lowest price per unit of the informed order ...
Staff Reports , Paper 28

Conference Paper
Creating contingent liabilities: master craftsmanship in financial engineering
Kensinger, John W.; Chen, Andrew H. (1990)
Proceedings , Paper 271

Working Paper
Derivatives on volatility: some simple solutions based on observables
Heston, Steven L.; Nandi, Saikat (2000)
Proposals to introduce derivatives whose payouts are explicitly linked to the volatility of an underlying asset have been around for some time. In response to these proposals, a few papers have tried to develop valuation formulae for volatility derivatives?derivatives that essentially help investors hedge the unpredictable volatility risk. This paper contributes to this nascent literature by developing closed-form/analytical formulae for prices of options and futures on volatility as well as volatility swaps. The primary contribution of this paper is that, unlike all other models, our model ...
FRB Atlanta Working Paper , Paper 2000-20

Working Paper
Exchange rates, optimal debt composition, and hedging in small open economies
Berrospide, Jose M. (2008)
This paper develops a model of the firm's choice between debt denominated in local currency and that denominated in foreign currency in a small open economy characterized by exchange rate risk and hedging possibilities. The model shows that the currency composition of debt and the level of hedging are endogenously determined as optimal firms' responses to a tradeoff between the lower cost of borrowing in foreign debt and the higher risk of such borrowing due to exchange rate uncertainty. Both the composition of debt and the level of hedging depend on common factors such as foreign exchange ...
Finance and Economics Discussion Series , Paper 2008-18

Working Paper
Immunizing options against changes in volatility
Shaffer, Sherrill (1989)
Working Papers , Paper 90-5

Report
An analysis of OTC interest rate derivatives transactions: implications for public reporting
Sarkar, Asani; Li, Ada; Fleming, Michael J.; Jackson, John; Zobel, Patricia (2012)
This paper examines the over-the-counter (OTC) interest rate derivatives (IRD) market in order to inform the design of post-trade price reporting. Our analysis uses a novel transaction-level data set to examine trading activity, the composition of market participants, levels of product standardization, and market-making behavior. We find that trading activity in the IRD market is dispersed across a broad array of product types, currency denominations, and maturities, leading to more than 10,500 observed unique product combinations. While a select group of standard instruments trade with ...
Staff Reports , Paper 557

Working Paper
Hedging inflation and income risks
Shiller, Robert J. (1994)
This paper describes potential new markets for long-term inflation risk, and shows the relationship such markets would have to other potential new markets, markets for long-term claims on income aggregates. One inflation-risk market which would be very useful is a market for long-term (or perpetual) claims on a cash flow of constant real value each period, a cash flow measured each period by an index of consumer prices. Such markets need not take the form of indexed government or corporate debt; it would be more natural to create futures-like markets for cash flows tied to an index and paid ...
Working Papers in Applied Economic Theory , Paper 94-10

Newsletter
Financial Accounting Standard no. 133--the reprieve
Ashley, Lisa K.; Bliss, Robert R. (1999-07)
Chicago Fed Letter , Issue Jul

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