16

A simple correlation/beta analysis of the Banks-relative-to-market versus interest rates or bond yields will tell you that the effect is real enough, whether in Europe, the US, or Japan... Likewise, a simple multiple regression of bank equity to the equity market and to swap rates will also suggest that the rates beta is almost as significant, sometimes more ...


7

I downvoted because I think the FED is very detailed in their documentation. The definition of a forward is a very basic financial question that a bit of google search can answer and not a quant question. Nonetheless, since your question is upvoted, others think differently. As the links you provided state: Breakeven is: 5-Year Treasury Constant Maturity ...


6

Simplified: Banks usually live of the margin between what interest people pay fro credit vs. what interest people get for leaving their money with the bank. The higher the difference between the two, the more money is left for the bank. Before the last crisis banks increased this margin by high risk investments, which promised higher interest rates. Several ...


6

Edit: adding some references (main body is untouched) Kenneth Rogoff and Richard Meese received an incredulous reaction to their now-famous paper showing that random-walk (RW) forecasts outperform economic models of exchange rates. Reactions were along the line of “You just cannot possibly have done it right” or "the results are obviously garbage". ...


4

There are tons of quant related blogs out there, some of which contain relatively sophisticated content, others less so. Have a look at the following, which aggregates blogs: MoneyScience Otherwise I could point you to bank/sell-side research. Have a look at the freely available Reuters Messenger (RM), they maintain channels where you can be permissioned ...


4

A good starting point Macroeconomics by Blanchard http://www.amazon.co.uk/Macroeconomics-MyEconLab-Pearson-Access-Package/dp/0133103064/ref=dp_ob_title_bk


3

Clearly the money markets are likely to freeze up in a crisis situation. They did exactly that in 2008. Specifically: A) people don't want to lend money unsecured to banks, so bank commercial paper goes below par in the market. B) understanding this , people try to liquidate money market funds containing bank cp at par, so a run develops on money market ...


3

Volatility changes over time. Even if daily returns are normal, assuming the conditional volatility each day is known, the unconditional distribution of daily returns will have excess kurtosis. For example, if daily returns have a standard deviation of 1%, 90% of the time, and a standard deviation of 3%, 10% of the time, the presence of the high-volatility 3%...


3

Here is one recipe, in case you can live with Spearman rank correlation. (Which you should: linear correlation is often not appropriate in the non-normal case. And in the normal case, there is almost no difference between the two correlation types.) Generate samples of your $k$ features with all the desired attributes. These samples may be random or ...


3

Both original datasets are not normalized to Q4 2007; Wilshire 5000 Total Market Full Cap Index WILL5000INDFC and GDP. However, Total Market Full Cap would imply a value far above 214. On a side remark, there are a bunch of Wilshire indices. It is simply done to make it comparable and once you have the same units, the ratio will always result in the same ...


2

Here is a good explanation by the SF Fed. In a nutshell, there is the current account (trade deficit/ surplus) financial account (asset bought/ sold overseas) and the capital account (intangible assets, usually negligible). The sum of the three for each country is zero by definition. Therefore the trade deficit must be accompanied by a financial account ...


2

To evaluate the impact on your FX portfolio of an increase in LIBOR, or any other rate for that matter, you must know: Which currencies you have exposure to Which positions have a floating rate exposure and to what rate. You can then model the relationship between LIBOR and those variables. Without that information, you cannot do anything. For example, ...


2

The concept of entropy in the financial field is related to the market efficiency and predictability one; the measure approximate entropy by Pincus (1991) is considered as a market efficiency measure and it has been empirically proven it is correlated to the main market efficiency measures as shown by Eon & Kim (2008) and Risso (2008). I suggest you to ...


2

Take logs of both sides, i.e. $$\log Y=\log A+ a \log K +(1-a)\log L$$ This gives: $$\Delta\log Y = \Delta\log A + a \Delta\log K +(1-a) \Delta\log L$$ Then use that $\frac{d}{dx}\log x= 1/x$, which yields $\Delta\log x=\Delta x/x$. Apply that to each log-diff above.


2

List of books: Romer’s book on Advanced Macro, whatever John Taylor’s latest macro book is, Minsky’s Keynes book and his Stabilizing an Unstable Economy book, Cassidy’s How Markets Fail, Shillers’ Animal Spirits, Debunking Economics by Keen, Meltdown by Woods, General Theory by Keynes, and (probably) Post-Keynesian Economics by Lavoie. That is only a ...


2

I do not think such figure exist in its per-canned form. However, for the most part, any pension/social security/annuity provider needs to have an idea of that, since it is their current and future liability that we are talking about. A quick and dirty way would be to look at US Social Security's funds, and get an estimate of how underfunded they are (so you ...


2

Cholesky (or SVD or any other approach based on matrix multiplication) only works for normal distributions, which your features cannot be, given that they have values within finite intervals. To see why Cholesky does not work, assume two additional features, which are independent uniform $(U_1,U_2)$. Now you want to create features with correlation $\rho$ ...


2

Yes of course. They pay billions in interest to the central bank (ECB) and that consumes most of the profit they make on lending it out. European banks in particular are struggling to turn profitable.


2

(A good book on emerging markets FX is: https://www.amazon.com/Trading-Fixed-Income-Emerging-Markets-dp-1119598990/dp/1119598990/ https://www.wiley.com/en-us/Trading+Fixed+Income+and+FX+in+Emerging+Markets%3A+A+Practitioner%27s+Guide-p-9781119598992 Dirk Willer, Ram Bala Chandran, Kenneth Lam. Trading Fixed Income and FX in Emerging Markets - A Practitioner'...


2

"How does FED qua[n]tify inflation expectation?" NY Fed survey, UoM survey, Philly Fed SPF, proprietary adjustments to breaks for various risk premia, etc. But overall, this question should probably be in economics stack exchange. NY Fed survey UoM survey Philly Fed SPF


2

A simple model of the firm Consider a firm with the following properties The firm is a monopolist. The firm is fully equity-financed. The firm owns production assets which the firm can switch on or off, depending on the level of an exogenous process $X$ (that may be the productivity of the assets, demand for the output good, etc.). The firm can choose the ...


1

Since the correlation matrix $C=LL^{\top}$ is also $C=U^{\top}U$, where $U$ is the upper triangular matrix, rather than $L$ the lower triangular matrix, you can transform an uncorrelated features matrix $F$ containing features 1, 2 and 3 in its columns by multiplying this $F$ matrix with $U$, giving the correlated features matrix $F_c$: $$F_c = F U $$ In ...


1

Suppose your (first) Quarter on Quarter growth rate was 3% and that spanned 3 months and you want to know how much each month grew. That is you want to know the growth rate for Jan, Feb and Mar, call them $\alpha, \beta, \gamma$. The only information you have is that: $(1+\alpha)(1+\beta)(1+\gamma) = 1 + 3\%$ This is one equation for 3 unknowns and ...


1

Probably economics stack exchange would be more correct for this. It is quite common to have such demand functions in non perfectly competitive markets. Take for example two firms (1) and (2), which strategically interact. Their demand functions should depend on prices of the one another. $q_1 = a - p_1 + c p_2$ $q_2 = a - p_2 + c p_1$ The basic ...


1

I think the mistake is how to define $\ Y_t$. It is supposed to contain endogenous and exogenous variables. Hence, the multivariate white noise in the VAR analysis should full fill the following conditions: $E(\epsilon_t )=0$ and $E(\epsilon_t \epsilon_s^{‚})$ equals either $0$ if $t \neq s$, or $\sum{\epsilon}$ if $t=s$. In the case of $t=s$, this ...


1

The most authoritative source for those questions is the following book: Expected Returns: An Investor's Guide to Harvesting Market Rewards by Antti Ilmanen You can find a free shortened (but still exhaustive) version here: Ilmanen, Antti, Expected Returns on Major Asset Classes (June 1, 2012). CFA Institute Research Foundation 2012 - 1. Available at SSRN:...


1

These are good questions. 1: Yes. Similarly, consider absolute yield level as a regressand. 2: Regress on unemployment absolute AND difference. You can toss out any statistically insignificant (||<2). 3: Perhaps matching in time for observable and dependent variable is best; you can test lagged models, which is significant in the context of credit ...


1

In the literature, this is called capital structure transmission channel of monetary policy. A recent paper, addresses this question$^\star$.As Central Bank announces purchase of corporate bonds, firms of interest exhibit lower bond yields (40bps one year after announcement) and shift to bond market, relatively to bank loans. Note that firms not included in ...


1

I recently stumbled over an interesting study related to this question: Yaneer Bar-Yam et al. from the New England Complex Systems Institute (NECSI) published a study in 2011 that used "measures of collective panic" to "predict economic market crises". To cite a report about the paper: [...] Research analysts have found [that] high levels of collective ...


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