Overview

Overview of Special Issue: Federal Reserve Policy Responses to the Financial Crisis.Financial crises ; Federal Reserve System ; Bank liquidity

The effect of interest rate options hedging on term-structure dynamics

Market participants and policymakers closely monitor movements in the yield curve for information about future economic fundamentals. In several recent episodes, however, disruptions to market liquidity have affected the short-term dynamics of the curve independently of fundamentals. This article provides evidence that the short-run dynamics in the intermediate maturities of the yield curve changed around 1990, with the appearance of positive feedback in weekly interest rate changes. The feedback is consistent with the effects of options dealers’ hedging activity and it is found only in the 1990s, after the interest rate options market grew to significant size. The authors also show that the market liquidity/positive-feedback effects are concentrated in the weeks after the largest interest rate changes. Their results suggest that the times when market participants and policymakers are most interested in extracting from the yield curve a signal about economic fundamentals are precisely the times when changes in the curve may be distorted by liquidity effects.Interest rates ; Options (Finance) ; Hedging (Finance) ; Rate of return ; Liquidity (Economics)

The monetary transmission mechanism: some answers and further questions

Overview of the proceedings of a conference sponsored by the Federal Reserve Bank of New York entitled Financial Innovation and Monetary TransmissionMonetary policy ; Financial modernization ; Bank reserves ; Interest rates

Mortgage refinancing and the concentration of mortgage coupons

Because of the concentrated distribution of interest rates on outstanding mortgages, modest interest rate declines in 1997 and 1998 made refinancing a smart choice for a record number of homeowners. In addition, the strong economy and the age of mortgage loans likely contributed to the surge in refinancing activity.Mortgages ; Housing - Finance ; Interest rates

An international survey of stress tests

In the summer of 2000, central banks from the Group of Ten countries surveyed large international banks about their use of stress tests_a risk management tool that measures a firm's exposure to extreme movements in asset prices. The survey findings highlight the risks that most concern financial institutions and clarify how these institutions use stress tests in their overall risk management programs.Risk management ; Risk assessment ; Financial services industry

Probing the core structure and evolution of red giants using gravity-dominated mixed modes observed with Kepler

We report for the first time a parametric fit to the pattern of the \ell = 1 mixed modes in red giants, which is a powerful tool to identify gravity-dominated mixed modes. With these modes, which share the characteristics of pressure and gravity modes, we are able to probe directly the helium core and the surrounding shell where hydrogen is burning. We propose two ways for describing the so-called mode bumping that affects the frequencies of the mixed modes. Firstly, a phenomenological approach is used to describe the main features of the mode bumping. Alternatively, a quasi-asymptotic mixed-mode relation provides a powerful link between seismic observations and the stellar interior structure. We used period \'echelle diagrams to emphasize the detection of the gravity-dominated mixed modes. The asymptotic relation for mixed modes is confirmed. It allows us to measure the gravity-mode period spacings in more than two hundred red giant stars. The identification of the gravity-dominated mixed modes allows us to complete the identification of all major peaks in a red giant oscillation spectrum, with significant consequences for the true identification of \ell = 3 modes, of \ell = 2 mixed modes, for the mode widths and amplitudes, and for the \ell = 1 rotational splittings. The accurate measurement of the gravity-mode period spacing provides an effective probe of the inner, g-mode cavity. The derived value of the coupling coefficient between the cavities is different for red giant branch and clump stars. This provides a probe of the hydrogen-shell burning region that surrounds the helium core. Core contraction as red giants ascend the red giant branch can be explored using the variation of the gravity-mode spacing as a function of the mean large separation.Comment: Accepted in A&

A decomposition of the increased stability of GDP growth

Since 1984, the U.S. economy has grown at a remarkably steady pace. An analysis of this increased stability shows that every major component of GDP has exhibited smoother growth. However, two components--inventory investment and consumer spending--are responsible for the bulk of the decline in overall volatility.Gross domestic product ; Capital investments ; Inventories ; Consumption (Economics)

Short-lived spots in solar-like stars as observed by CoRoT

Context. CoRoT light curves have an unprecedented photometric quality, having simultaneously a high signal-to-noise ratio, a long time span and a nearly continuous duty-cycle. Aims. We analyse the light-curves of four bright targets observed in the seismology field and study short-lived small spots in solar-like stars. Methods. We present a simple spot modeling by iterative analysis. Its ability to extract relevant parameters is ensured by implementing relaxation steps to avoid convergence to local minima of the sum of the residuals between observations and modeling. The use of Monte-Carlo simulations allows us to estimate the performance of the fits. Results. Our starspot modeling gives a representation of the spots on these stars in agreement with other well tested methods. Within this framework, parameters such as rigid-body rotation and spot lifetimes seem to be precisely determined. Then, the lifetime/rotation period ratios are in the range 0.5 - 2, and there is clear evidence for differential rotation.Comment: 11 pages Accepted in A&

SYMPA, a dedicated instrument for Jovian Seismology. II. Real performance and first results

Context. Due to its great mass and its rapid formation, Jupiter has played a crucial role in shaping the Solar System. The knowledge of its internal structure would strongly constrain the solar system formation mechanism. Seismology is the most efficient way to probe directly the internal structure of giant planets. Aims. SYMPA is the first instrument dedicated to the observations of free oscillations of Jupiter. Principles and theoretical performance have been presented in paper I. This second paper describes the data processing method, the real instrumental performance and presents the first results of a Jovian observation run, lead in 2005 at Teide Observatory. Methods. SYMPA is a Fourier transform spectrometer which works at fixed optical path difference. It produces Doppler shift maps of the observed object. Velocity amplitude of Jupiter's oscillations is expected below 60 cm/s. Results Despite light technical defects, the instrument demonstrated to work correctly, being limited only by photon noise, after a careful analysis. A noise level of about 12 cm/s has been reached on a 10-night observation run, with 21 % duty cycle, which is 5 time better than previous similar observations. However, no signal from Jupiter is clearly highlighted.Comment: 13 pages, 26 figure

Asymptotic and measured large frequency separations

With the space-borne missions CoRoT and Kepler, a large amount of asteroseismic data is now available. So-called global oscillation parameters are inferred to characterize the large sets of stars, to perform ensemble asteroseismology, and to derive scaling relations. The mean large separation is such a key parameter. It is therefore crucial to measure it with the highest accuracy. As the conditions of measurement of the large separation do not coincide with its theoretical definition, we revisit the asymptotic expressions used for analysing the observed oscillation spectra. Then, we examine the consequence of the difference between the observed and asymptotic values of the mean large separation. The analysis is focused on radial modes. We use series of radial-mode frequencies to compare the asymptotic and observational values of the large separation. We propose a simple formulation to correct the observed value of the large separation and then derive its asymptotic counterpart. We prove that, apart from glitches due to stellar structure discontinuities, the asymptotic expansion is valid from main-sequence stars to red giants. Our model shows that the asymptotic offset is close to 1/4, as in the theoretical development. High-quality solar-like oscillation spectra derived from precise photometric measurements are definitely better described with the second-order asymptotic expansion. The second-order term is responsible for the curvature observed in the \'echelle diagrams used for analysing the oscillation spectra and this curvature is responsible for the difference between the observed and asymptotic values of the large separation. Taking it into account yields a revision of the scaling relations providing more accurate asteroseismic estimates of the stellar mass and radius.Comment: accepted in A&