Related papers: Negative interest rates: why and how?
We introduce the concept of "negative bubbles" as the mirror image of standard financial bubbles, in which positive feedback mechanisms may lead to transient accelerating price falls. To model these negative bubbles, we adapt the…
Research has shown banks match interest income and expense betas, and thereby obtain net interest income margins which are insensitive to changes in short-term interest rates. The present analysis extends this research in a number of ways.…
The controversial existence of negative temperatures has stirred interesting debates that have reached the foundations of thermodynamics, including questions on the second law, the Carnot efficiency and the statistical definition of…
We consider the problem of modelling the term structure of defaultable bonds, under minimal assumptions on the default time. In particular, we do not assume the existence of a default intensity and we therefore allow for the possibility of…
We study the effects on economic activity of a pure temporary change in government debt and the relationship between the debt multiplier and the level of debt in an overlapping generations framework. The debt multiplier is positive but…
The planewave response of a linear passive material generally cannot be characterized by a single scalar refractive index, as directionality of energy flow and multiple wavevectors may need to be considered. This is especially significant…
We investigate a relationship between the number of the negative modes around periodic instanton solution and the type of the decay-rate transition. It is shown that for the case of first-order decay-rate transition the lowest positive mode…
The notion of a credit spread curve is fundamental in fixed income investing, but in practice it is not `given' and needs to be constructed from bond prices either for a particular issuer, or for a sector rating-by-rating. Rather than…
The existence of involuntary unemployment advocated by J. M. Keynes is a very important problem of the modern economic theory. Using a three-generations overlapping generations model, we show that the existence of involuntary unemployment…
We report empirical evidences on the existence of a conditional dynamics driving the evolution of financial assets which is found in several markets around the world and for different historical periods. In particular, we have analyzed the…
How does public debt matter for price stability? If it is useful for the private sector to insure idiosyncratic risk, even transitory government debt expansions can exert upward pressure on interest rates and create inflation. As I…
We study financial networks where banks are connected by debt contracts. We consider the operation of debt swapping when two creditor banks decide to exchange an incoming payment obligation, thus leading to a locally different network…
In this survey paper we discuss recent advances on short interest rate models which can be formulated in terms of a stochastic differential equation for the instantaneous interest rate (also called short rate) or a system of such equations…
When an insurance note is also a derivative a serious problem arises because a derivative must be fulfilled immediately. This feature of derivatives prevents claims processing procedures that screen out ineligible claims. This, in turn,…
In Kenya, interest payments on external debt have been increasing from 2010 to 2015, while GDP growth experienced a slight decline over the same period. Policymakers are concerned that the rapid increase in external debt in developing…
Trading strategies that were profitable in the past often degrade with time. Since unlucky streaks can also hit "healthy" strategies, how can one detect that something truly worrying is happening? It is intuitive that a drawdown that lasts…
We derive some simple relations that demonstrate how the posterior convergence rate is related to two driving factors: a "penalized divergence" of the prior, which measures the ability of the prior distribution to propose a nonnegligible…
Recent highly cited research uses time-series evidence to argue the decline in interest rates led to a large rise in economic profits and markups. We show the size of these estimates is sensitive to the sample start date: The rise in…
We empirically investigate the distributional effects of inflation on workers' unemployment tail risks using instrumental variable quantile regression. We find that supply-driven inflation disproportionately raises unemployment tail risks…
We analyze the causal impact of positive and negative feedback on professional performance. We exploit a unique data source in which quasi-random, naturally occurring variations within subjective ratings serve as positive and negative…