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Economic Research

Recent Publications
A Pilot Survey of Agent Securities Lending Activity
The Financial Stability Oversight Council has identified a lack of data on securities lending activity as a priority to be addressed. In this paper, the authors report aggregate statistics on securities lending activity based on a recently concluded pilot data collection by U.S. financial regulators.
By Viktoria Baklanova, Cecilia Caglio, Frank Keane, and Burt Porter, Staff Reports 790, August 2016
Global Variance Term Premia and Intermediary Risk Appetite
Variance swaps contain valuable information regarding investor expectations about the resolution of market uncertainty, as well as insights into investor preferences for risk across different time horizons. In this paper, the authors propose a new term-structure model to help understand the expected quantity and pricing of risk.
By Peter Van Tassel and Erik Vogt, Staff Reports 789, August 2016
Characteristic-Sorted Portfolios: Estimation and Inference
The premise behind portfolio sorting is to discover whether the expected returns of an asset are related to a certain characteristic. In this paper, the authors present a framework formalizing portfolio-sorting-based estimation and inference. They also provide guidance on how to choose the number of portfolios to draw accurate conclusions from the data.
By Matias D. Cattaneo, Richard K. Crump, Max H. Farrell, and Ernst Schaumburg, Staff Reports 788, August 2016
Tracking and Stress-Testing U.S. Household Leverage
The authors analyze household leverage—the ratio of housing debt to housing values—at the borrower level. Their stress tests to project the likely consequences of house price shocks of different severities reveal that, although the housing sector remains vulnerable to severe price declines, increased creditworthiness among today’s borrowers mitigates that effect.
By Andreas Fuster, Benedict Guttman-Kenney, and Andrew Haughwout, Staff Reports 787, August 2016
Global Price of Risk and Stabilization Policies
The authors quantify the degree to which monetary, fiscal, and prudential policies interact with the global price of risk to influence economic outcomes. They uncover a risk-return trade-off in growth and stability that is related to a country’s exposure to the pricing of risk and that is tilted by the conduct of monetary, fiscal, and prudential policy.
By Tobias Adrian, Daniel Stackman, and Erik Vogt, Staff Reports 786, August 2016
Trading Activity in the Indian Government Bond Market
The authors study the Indian government bond market with a goal of better understanding how it functions, how it has changed over time, and what factors drive certain aspects of the primary and secondary markets. They present various models as a way of exploring the determinants of underwriting commissions, trading activity, and trading venue.
By Michael Fleming, Samita Sareen, and Seema Saggar, Staff Reports 785, August 2016
Trends in Credit Market Arbitrage
Corporate bonds are an important source of funding for public corporations. In this paper, the authors examine recent trends in arbitrage-based measures of liquidity in the cash bond and the credit default swap (CDS) markets. They evaluate potential explanations proposed for the widening in both arbitrage trades between mid-2015 and early 2016.
By Nina Boyarchenko, Pooja Gupta, and Jacqueline Yen, Staff Reports 784, July 2016