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Journal Article
New directions for understanding systemic risk: a report on a conference cosponsored by the Federal Reserve Bank of New York and the National Academy of Sciences
The Federal Reserve Bank of New York released a report -- New Directions for Understanding Systemic Risk -- that presents key findings from a cross-disciplinary conference that it cosponsored in May 2006 with the National Academy of Sciences' Board on Mathematical Sciences and Their Applications. ; The pace of financial innovation over the past decade has increased the complexity and interconnectedness of the financial system. This development is important to central banks, such as the Federal Reserve, because of their traditional role in addressing systemic risks to the financial system. ; ...
Journal Article
Part 2: Current trends in economic research on systemic risk
The Federal Reserve Bank of New York released a report -- New Directions for Understanding Systemic Risk -- that presents key findings from a cross-disciplinary conference that it cosponsored in May 2006 with the National Academy of Sciences' Board on Mathematical Sciences and Their Applications. ; The pace of financial innovation over the past decade has increased the complexity and interconnectedness of the financial system. This development is important to central banks, such as the Federal Reserve, because of their traditional role in addressing systemic risks to the financial system. ; ...
Journal Article
Part 4: The payments system and the market for interbank funds
The Federal Reserve Bank of New York released a report -- New Directions for Understanding Systemic Risk -- that presents key findings from a cross-disciplinary conference that it cosponsored in May 2006 with the National Academy of Sciences' Board on Mathematical Sciences and Their Applications. ; The pace of financial innovation over the past decade has increased the complexity and interconnectedness of the financial system. This development is important to central banks, such as the Federal Reserve, because of their traditional role in addressing systemic risks to the financial system. ; ...
Journal Article
Part 1: Introduction to New Directions for Understanding Systemic Risk
The Federal Reserve Bank of New York released a report -- New Directions for Understanding Systemic Risk -- that presents key findings from a cross-disciplinary conference that it cosponsored in May 2006 with the National Academy of Sciences' Board on Mathematical Sciences and Their Applications. ; The pace of financial innovation over the past decade has increased the complexity and interconnectedness of the financial system. This development is important to central banks, such as the Federal Reserve, because of their traditional role in addressing systemic risks to the financial system. ; ...
Journal Article
Dealers' hedging of interest rate options in the U.S. dollar fixed-income market
Despite investors' willingness to hold a variety of financial assets and risks, a significant share of interest rate options exposures remains in the hands of dealers. This concentration of risk makes the interest rate options market an ideal place to explore the effects of dealers' dynamic hedging on underlying markets. Using data from a global survey of derivatives dealers and other sources, this article estimates the potential impact of dynamic hedging by interest rate options dealers on the fixed-income market. The author finds that for short-term maturities, turnover volume in the most ...
Report
Interest rate options dealers' hedging in the US dollar fixed income market
The potential for the dynamic hedging of written options to lead to positive feedback in asset price dynamics has received repeated attention in the literature on financial derivatives. Using data on OTC interest rate options from a recent survey of global derivatives markets, this paper addresses the question whether that potential for positive feedback is likely to be realized. With the possible exception of the medium term segment of the term structure, transaction volume in available hedging instruments is sufficiently large to absorb the demands resulting from the dynamic hedging of US ...
Journal Article
Hedge funds, financial intermediation, and systemic risk
Hedge funds, with assets under management approaching an estimated $1.5 trillion in 2006, have become important players in the U.S. and global capital markets. These largely unregulated funds differ from other market participants in their use of a variety of complex trading strategies and instruments, in their liberal use of leverage, in their opacity to outsiders, and in their convex compensation structure. These differences can exacerbate potential market failures stemming from agency problems, externalities, and moral hazard. Counterparty credit risk management (CCRM) practices, used by ...