Home

Capital Markets

Our economists research and analyze a range of issues involving asset pricing, market microstructure, and other financial market topics.

New from Liberty Street Economics

The New Bank Resolution Regimes and "Too-Big-to-Fail" Are markets changing their perceptions of risk relating to global financial institutions deemed “too-big-to fail”? This post finds that investors are beginning to price in a higher risk of default on senior bonds issued by these institutions. By Jennie Bai, Christian Cabanilla, and Menno Middeldorp

Data

The Yield Curve as a Leading Indicator Research on the yield curve as a predictor of future real U.S. economic activity.

Recent Articles

Assessing the Quality of “Furfine-based” Algorithms Some academic research on the fed funds market relies on individual transactions inferred indirectly from an algorithm, the accuracy of which has not been formally established. This paper tests the algorithm, and obtains results that raise concerns about its appropriateness. By Olivier Armantier and Adam Copeland, Staff Report 575, October 2012

Information Acquisition and Financial Intermediation This paper considers the problem of information acquisition in an intermediated market, where the specialists have access to superior technology for acquiring information. By Nina Boyarchenko, Staff Reports 571, September 2012

Pricing TIPS and Treasuries with Linear Regressions The authors present an affine term structure model for the joint pricing of Treasury Inflation-Protected Securities (TIPS) and Treasury yield curves that adjusts for TIPS’ relative illiquidity. By Michael Abrahams, Tobias Adrian, Richard K. Crump, and Emanuel Moench, Staff Reports 570, September 2012

Intermediary Leverage Cycles and Financial Stability The authors develop a dynamic stochastic general equilibrium (DSGE) model that captures the leverage cycle of financial intermediaries and the relation between asset returns and intermediary leverage in an empirically relevant way. By Tobias Adrian and Nina Boyarchenko, Staff Reports 567, August 2012

Market Declines: What Is Accomplished by Banning Short-Selling? Short-selling bans imposed in 2008 failed to stem the decline of U.S. stock prices during the financial crisis. In addition, the bans had the unwanted effects of reducing market liquidity and raising trading costs. By Robert Battalio, Hamid Mehran, and Paul Schultz, Current Issues in Economics and Finance 18 (5), August 2012