Central bank research hub  Papers by Wenxin Du
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Research hub papers by author Wenxin Du
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The dollar, bank leverage and the deviation from covered interest parity
http://www.bis.org/publ/work592.pdf
Bank for International Settlements Working papers by Stefan Avdjiev, Wenxin Du, Catherine Koch and Hyun Song Shin
The dollar, bank leverage and the deviation from covered interest parity
20161115T17:38:00Z
We document the triangular relationship formed by the strength of the US dollar, crossborder bank lending in dollars and deviations from covered interest parity (CIP). A stronger dollar goes handinhand with bigger deviations from CIP and contractions of crossborder bank lending in dollars. Differential sensitivity of CIP deviations to the strength of the dollar can explain ...
The dollar, bank leverage and the deviation from covered interest parity
BIS
Abstract
http://www.bis.org/publ/work592.htm
Full text
http://www.bis.org/publ/work592.pdf
Stefan Avdjiev
Wenxin Du
CathÃ©rine Koch
Hyun Song Shin
Stefan Avdjiev, Wenxin Du, Catherine Koch and Hyun Song Shin
20161115
Bank for International Settlements BIS Working Papers
F3
G1
G2

Counterparty Risk and Counterparty Choice in the Credit Default Swap Market
http://www.federalreserve.gov/econresdata/feds/2016/files/2016087pap.pdf
Board of Governors of the Federal Reserve System FEDS series by Wenxin Du, Salil Gadgil, Michael B. Gordy, and Clara Vega
Counterparty Risk and Counterparty Choice in the Credit Default Swap Market
20161010T10:40:59Z
We investigate how market participants price and manage counterparty risk in the postcrisis period using confidential trade repository data on singlename credit default swap (CDS) transactions. We find that counterparty risk has a modest impact on the pricing of CDS contracts, but a large impact on the choice of counterparties. We show that market participants are significantly less likely to trade with counterparties whose credit risk is highly correlated with the credit risk of the reference entities and with counterparties whose credit quality is relatively low. Furthermore, we examine the impact of central clearing on CDS pricing. Contrary to the previous literature, but consistent with our main findings on pricing, we find no evidence that central clearing increases transaction spreads.
Counterparty Risk and Counterparty Choice in the Credit Default Swap Market
Full text
http://www.federalreserve.gov/econresdata/feds/2016/files/2016087pap.pdf
Salil Gadgil
Wenxin Du
Michael B. Gordy
Clara Vega
Wenxin Du, Salil Gadgil, Michael B. Gordy, and Clara Vega
201611
Board of Governors of the Federal Reserve System Finance and Economics Discussion Series
G12
G13
G24

Local Currency Sovereign Risk
http://www.federalreserve.gov/pubs/ifdp/2013/1094/ifdp1094.pdf
Board of Governors of the Federal Reserve System International Financial Discussion Papers by Wenxin Du and Jesse Schreger
Local Currency Sovereign Risk
20140102T17:50:59Z
Do governments default on debt denominated in their own currency? We introduce a new measure of sovereign credit risk, the local currency credit spread, defined as the spread of local currency bonds over the synthetic local currency riskfree rate constructed using cross currency swaps. We find that local currency credit spreads are positive and sizable. Compared with credit spreads on foreign currency denominated debt, local currency credit spreads have lower means, lower crosscountry correlations, and are less sensitive to global risk factors. Global risk aversion and liquidity factors can explain more time variation in these credit spread differentials than macroeconomic fundamentals.
Local Currency Sovereign Risk
Abstract
http://www.federalreserve.gov/pubs/ifdp/2013/1094/default.htm
Full text
http://www.federalreserve.gov/pubs/ifdp/2013/1094/ifdp1094.pdf
Jesse Schreger
Wenxin Du
Wenxin Du and Jesse Schreger
20131220
Board of Governors of the Federal Reserve System International Financial Discussion Papers

Nonparametric HAC Estimation for Time Series Data with Missing Observations
http://www.federalreserve.gov/pubs/ifdp/2012/1060/ifdp1060.pdf
Board of Governors of the Federal Reserve System International Financial Discussion Papers by Deepa Dhume Datta and Wenxin Du
Nonparametric HAC Estimation for Time Series Data with Missing Observations
20121110T06:23:59Z
Deepa Dhume Datta and Wenxin Du. The Newey and West (1987) estimator has become the standard way to estimate a heteroskedasticity and autocorrelation consistent (HAC) covariance matrix, but it does not immediately apply to time series with missing observations. We demonstrate that the intuitive approach to estimate the true spectrum of the underlying process using only the observed data leads to incorrect inference. Instead, we propose two simple consistent HAC estimators for time series with missing data. First, we develop the Amplitude Modulated estimator by applying the NeweyWest estimator and treating the missing observations as nonserially correlated. Secondly, we develop the Equal Spacing estimator by applying the NeweyWest estimator to the series formed by treating the data as equally spaced. We show asymptotic consistency of both estimators for inference purposes and discuss finite sample variance and bias tradeoff. In Monte Carlo simulations, we demonstrate that the Equal Spacing estimator is preferred in most cases due to its lower bias, while the Amplitude Modulated estimator is preferred for small sample size and low autocorrelation due to its lower variance.
Nonparametric HAC Estimation for Time Series Data with Missing Observations
Abstract
http://www.federalreserve.gov/pubs/ifdp/2012/1060/default.htm
Full text
http://www.federalreserve.gov/pubs/ifdp/2012/1060/ifdp1060.pdf
Deepa Dhume Datta
Wenxin Du
Deepa Dhume Datta and Wenxin Du
20121108
Board of Governors of the Federal Reserve System International Financial Discussion Papers