The evaluation of the Canadian BAX contract in managing short-term interest rate exposure

Purpose – The purpose of this paper is to document stylized features and market behaviour of the Canadian Bankers' Acceptance Futures (BAX) contract; and outlook for the BAX contract as the dominant instrument to manage Canadian short-term interest rate exposure. Design/methodology/approach – The paper adopts GARCH methodology to model the time-varying nature of the volatility of prices in the context of hedging and presents a time-varying estimation of the hedge ratios between the BAX contract and major Canadian money market instruments. Findings – The key finding is that the growth of the BAX Market hinges on the further development of the Canadian money market and its appeal to the international investor. Originality/value – The paper demonstrates the suitability of the BAX contract as a tool in managing Canadian short-term interest rate exposure for both domestic and international investors.

Trust and reciprocity with transparency and repeated interactions

This paper uses data from a controlled laboratory environment to study the impact of transparency (i.e., complete information versus incomplete information) and repeated interactions on the level of trust and trustworthiness (reciprocity) in an investment game setting. The key findings of the study are that transparency (complete information) significantly increases trusting behavior in one-shot interactions. This result persists in repeated interactions. Further, transparency appears important for trustworthiness in one-shot interactions. In addition, repeated interaction increases trust and reciprocity with or without transparency. These results suggest that transparency is important in building trust in business environments such as alliances and joint ventures which are loosely connected organizational forms that bring together otherwise independent firms. It also provides support for the Sarbanes-Oxley Act of 2002 (SOX) and similar legislation elsewhere which attempt to regain investors' trust in corporate management and financial markets by stipulating enhanced disclosures.Transparency Trust Reciprocity Repeated interaction Business alliances SOX