Latest from the OFR

Analysis

Financial Markets Monitor

March 31, 2015

Divergent Monetary Policies Continue to Drive Market Trends

The divergence of global monetary policies remains a dominant theme, driving important market trends. While the Federal Reserve is expected to tighten policy, many other central banks are undertaking additional easing. The expansion of quantitative easing programs and negative interest rates — which may be justified to prevent economic stagnation — entail financial stability risks that warrant monitoring and, where possible, mitigation.

Analysis

Working Papers

March 26, 2015

Contract as Automaton: The Computational Representation of Financial Agreements

Contract as Automaton: The Computational Representation of Financial Agreements

By Mark D. Flood and Oliver R. Goodenough

This paper shows that the fundamental legal structure of a well-written financial contract follows a logic that can be formalized mathematically as a "deterministic finite automaton." This allows, for example, automated reasoning to determine whether a contract is internally coherent and complete. The paper illustrates the process by representing a simple loan agreement as an automaton.

News & Events

Public Appearances

March 24, 2015

Remarks by OFR Director Richard Berner at the Financial Regulation Summit: Data Transparency Transformation

Director Berner discusses how the OFR is developing and promoting data standards, and meeting the critical needs to share data and to fill data gaps.

Analysis

Briefs

March 17, 2015

Quicksilver Markets

Quicksilver Markets

By Ted Berg

This brief argues that U.S. stock prices today appear high by historical standards, using a quantitative threshold to identify potential stock market bubbles. Although the financial stability implications of a market correction could be moderate due to limited liquidity transformation in the U.S. equity market, the brief discusses other financial stability issues that may be more relevant, such as leverage, compressed pricing of risk, interconnectedness, and complexity.

Analysis

Working Papers

March 10, 2015

Market Liquidity and Heterogeneity in the Investor Decision Cycle

Market Liquidity and Heterogeneity in the Investor Decision Cycle

By Richard Bookstaber, Michael D. Foley, and Brian F. Tivnan

This paper presents a model of market liquidity in which those who need to sell come into the market with a greater need for immediacy than those who are willing to buy. This is a critical market dynamic behind the illiquidity that arises during market dislocations and crises, when some are in forced-selling mode while others are hesitant to come in and take the other side of the trade.

Analysis

Working Papers

March 03, 2015

Are the Federal Reserve’s Stress Test Results Predictable?

Are the Federal Reserve’s Stress Test Results Predictable?

By Paul Glasserman and Gowtham Tangirala

This paper examines the results of four rounds of stress testing of the largest U.S. bank holding companies, starting in 2009. The data reveal a growing correlation in results from one year to the next, highlighting whether the stress tests in their current form may be losing some of their information value over time. The authors discuss the implications of these patterns and recommend greater diversity in the stress scenarios analyzed.

Analysis

Financial Markets Monitor

February 25, 2015

Volatility Returns Amid Oil Price Declines, European Developments

Volatility Returns Amid Oil Price Declines, European Developments

Financial market volatility has increased significantly since late 2014. This is a shift from several years of largely depressed volatility, which contributed to excessive financial risk-taking as discussed in the OFR 2014 Annual Report. It remains to be seen whether this is an enduring normalization of volatility and what lasting effect, if any, it will have on financial risk-taking and stability.

Inside the OFR

Strategy & Budget

February 19, 2015

Office of Financial Research Strategic Plan Fiscal Years 2015-2019

Office of Financial Research Strategic Plan Fiscal Years 2015-2019

This plan provides OFR leaders with a roadmap for achieving the Office’s mission, vision, goals, and objectives. It also fulfills the OFR's commitment to being transparent and accountable, and to linking activities to strategic goals and performance metrics.

Analysis

Briefs

February 12, 2015

Systemic Importance Indicators for 33 U.S. Bank Holding Companies: An Overview of Recent Data

Systemic Importance Indicators for 33 U.S. Bank Holding Companies: An Overview of Recent Data

By Meraj Allahrakha, Paul Glasserman, and H. Peyton Young

This brief analyzes new data about the nation’s most systemically important bank holding companies — financial institutions whose failure could pose the greatest threat to the international financial system.

Attachment: Systemic Importance Indicators Reported by 33 Large U.S. Bank Holding Companies

News & Events

From the Management Team

February 12, 2015

OFR Brief Examines Data on Systemically Important Bank Holding Companies

OFR Brief Examines Data on Systemically Important Bank Holding Companies

By Patricia Mosser

The OFR released a brief today analyzing new data about the nation’s most systemically important bank holding companies — financial institutions whose failure could pose the greatest threat to the international financial system.