The financial content of inflation risks in the euro area

Recent studies emphasize that survey-based in ation risk measures are informative about future inflation and thus useful for monetary authorities. However, these data are typically available at a quarterly frequency whereas monetary policy decisions require a more frequent monitoring of such risks. Using the ECB survey of professional forecasters, we show that high-frequency nancial market data have predictive power for the low-frequency survey-based inflation risk indicators observed at the end of a quarter. We rely on MIDAS regressions to handle the problem of mixing data with different frequencies that such an analysis implies. We also illustrate that upside and downside risks react differently to fi nancial indicators

Des effets théoriques de l’introduction d’une contrepartie centrale pour l’organisation des marchés OTC

This article identifies and analyzes the various benefits and drawbacks that the adoption of a central counterparty [ CCP] for OTC markets can induce, notably in terms of counterparty, systemic, transparency and liquidity risks management. First, we look at how the transaction costs are affected by the introduction of this risk pooling entity. The implications of the presence of a CCP on the liquidity and market transparency are then analyzed. Finally, we discuss the various risks faced by the CCP (concentration risk, information asymmetry, moral hazard and adverse selection) and bring out some recommendations regarding the functioning and access to the CCP terms. Classification JEL : G15, G18, G23.Cet article recense et analyse les différents avantages et inconvénients que peut présenter l’instauration d’une chambre de compensation centrale pour les marchés OTC, notamment en termes de gestion des risques de contrepartie, systémique, de transparence et de liquidité. Nous regardons dans un premier temps en quoi les coûts de transaction sont affectés par la mise en place d’un tel organe de mutualisation des risques. Les conséquences de la présence d’une CCP sur la liquidité et la transparence des marchés sont ensuite analysées. Par la suite, nous discutons les différents risques encourus par la CCP (risque de concentration, asymétrie d’information, aléa moral et sélection adverse) et en dégageons quelques recommandations quant aux règles de fonctionnement et d’accès à la CCP. Nous concluons cette étude par quelques remarques sur l’opportunité de créer une CCP pour le marché particulier des CDS. Classification JEL : G15, G18, G23.Fourel Valère, Idier Julien. Des effets théoriques de l’introduction d’une contrepartie centrale pour l’organisation des marchés OTC. In: Revue d'économie financière, n°101, 2011. Le risque systémique 2. Repenser la supervision. pp. 53-71

Financial distress, dealers' behavior and asset pricing in the foreign exchange market

Thesis: S.M. in Management Research, Massachusetts Institute of Technology, Sloan School of Management, 2018.Cataloged from PDF version of thesis.Includes bibliographical references (pages 39-43).Exploiting a high frequency dealer-specific quote database in the FX market, I show that shocks to the CDS of a financial intermediary, proxy for its financial wealth, makes her quote larger bid-ask spreads when uncertainty about the underlying traded asset is high or when market competition is low. I first establish that markets are dominated by a handful of dealers who are responsible for more than 90% of the quotes in the different FX spot markets. I then document that, when exchange rate volatility is high, a 1% increase in intermediary's default probability does translate into a 4 bps increase in the bid-ask spread that she quotes. When competition is low, a similar deterioration in financial wealth leads to a 6.4 bps increase in bid-ask spread size. I finally show that in the case of emerging country currencies, the average CDS spread of the financial intermediaries quoting in the FX market is a statistically significant predictor for the volatility of the idiosyncratic component of the currency risk premium. More surprisingly, the dispersion in terms of financial wealth across financial intermediaries, measured as the variance of the financial intermediaries CDS spreads, is also an important determinant of this volatility for a large set of emerging country currencies.by Valère Fourel.S.M. in Management Researc