Inflation in the Great Recession and New Keynesian Models
Since the financial crisis of 2007-08 and the Great Recession, many commentators have been baffled by the “missing deflation” in the face of a large and persistent amount of slack in the economy.
Financial Stability Monitoring
In a recently released New York Fed staff report, we present a forward-looking monitoring program to identify and track time-varying sources of systemic risk.
Lifting the Veil on the U.S. Bilateral Repo Market
The repurchase agreement (repo), a contract that closely resembles a collateralized loan, is widely used by financial institutions to lend to each other.
Do Currency Forwards Say Anything about the Future Value of the U.S. Dollar?
J. Benson Durham Currency forwards do include useful information about the future value of the U.S. dollar, but any messages are hard to decipher without tools. Just as the yield curve reflects expected short rates as well as term premiums, foreign exchange forwards embed not only anticipated depreciation but also premiums for currency risk. This […]
What’s Your WAM? Taking Stock of Dealers’ Funding Durability
One of the lessons from the recent financial crisis is the need for securities dealers to have durable sources of funding.
Do Expected, in addition to Spot, U.S. Treasury Term Premiums Matter?
J. Benson Durham The spot term premium is the extra compensation investors require, today, to own long-term as opposed to short-term risk-free debt. The expected term premium is what they anticipate demanding later. Notably, the two don’t necessarily move in the same direction. Just as near-term expected short rates could decline with surprisingly easy monetary […]
When Are Equity Investors Paid to Take Risk?
Most gauges of “the” equity risk premium have declined since the financial crisis but remain elevated, even as broad market indexes near record highs.
Treasury Term Premia: 1961‑Present
Treasury yields can be decomposed into two components: expectations of the future path of short-term Treasury yields and the Treasury term premium.
Can Investors Use Momentum to Beat the U.S. Treasury Market?
Decades of research have produced a library on the “momentum” anomaly in markets. Momentum refers to the tendency for financial assets with the best prior returns to continue to outperform, at least for a time.
No Good Deals—No Bad Models
The recent financial crisis has highlighted the significance of unhedgable, illiquid positions in complex securities for individual financial institutions and for the global financial system as a whole.