Hello, I'm Umang.
I am a PhD candidate in finance at the University of Iowa, and an academic visitor at the Bank of England. I am spending Fall 2024 at the Harvard Business School.
My research interests include financial intermediation, asset pricing, market microstructure, and household finance. Currently, I am studying frictions in the international supply of the US dollar. My other ongoing projects explore the role of financial intermediaries in over-the-counter markets, and information asymmetries in non-intermediated markets.
Before graduate school, I worked at the Fixed Income and Foreign Exchange Markets division of J.P. Morgan, and graduated from the Indian Institute of Management Lucknow.
Research Papers
Recipient of the Inquire Europe Research Grant, 2024
Select presentations: AFA 2025, SFS Cavalcade North America 2024, European FA 2024, Office of Financial Research (OFR) Rising Scholars 2024, Bank of Canada, Bank of England.
We study interest rate risk sharing across the financial system using novel data on cross-sector interest rate swap positions. We show that pension funds and insurers (PF&I) are natural counterparties to banks and corporations: PF&I buy duration, whereas banks and corporations sell duration (figure on the right). However, demand is highly segmented across maturities, resulting in significant imbalances at various maturity points. We calibrate a preferred-habitat investors model with risk-averse arbitrageurs to study how demand imbalances interact with supply side constraints to impact swap spreads. Our framework helps quantify the spillover effects of demand shifts, which informs policy discussions on financial institutions’ hedging requirements.
This figure shows net outstanding positions in $ billion at the start of every month for five end-user sectors and the dealer sector. A positive value on the y-axis indicates a net receive fixed position while a negative value indicates a net pay fixed position.
Select presentations: Office of Financial Research (OFR) PhD Symposium 2024, Federal Reserve Bank of Atlanta (joint with Georgia State University).
Off-balance sheet foreign exchange (FX) swaps are a major source of US dollar funding for non-US banks that provide over half of global dollar credit. This paper shows that FX swaps emerge as alternative ("synthetic") funding instruments when banks face negative funding shocks from cash-market investors, such as US money market funds. The resulting increase in swap demand, combined with limits to arbitrage, leads to substantial deviations from covered interest parity (CIP) – the breakdown of a fundamental no-arbitrage pricing condition. I show a causal impact of banks’ swap demand on CIP deviations using an instrumental variables strategy that exploits idiosyncratic variation in money market funds’ investment in bank-level debt. The plot on the right correlates increased constraints in banks' ability to access wholesale dollar funding and more negative cross-currency basis.
This figure shows the fraction of Euro-area banks that are close to the maximum borrowing limit from US money market funds in a month (x-axis), and the EURUSD 1-month cross-currency basis in the following month (y-axis).
[3] Uninformed yet Consequential: Liquidity Shocks in FX Markets
Select presentations: Western Finance Association (WFA) Meetings 2022, 4th Future of Financial Information Conference 2022, Central Bank Conference in Microstructure of Financial Markets 2022, University of Missouri.
Currencies are one of the largest but least understood financial assets. In this paper, we tackle a longstanding question: what makes foreign exchange rates volatile? Using unique sector-level FX spot trading data across 40 currency pairs, we show that demand from liquidity-seeking investors such as corporations can drive short-term price volatility. We use changes in the timing of corporate trading due to month-end calendar effects (figure on the right) and identify a causal link between order imbalance and volumes, bid-ask spreads, and price volatility.
This figure shows that corporate order flow imbalance (absolute of buy minus sell volume) jumps two days before a month-end, in response to a "T+2" settlement cycle in the FX spot market.
[4] Unemployment Insurance Fraud in the Debit Card Market
NBER Working Paper #32527
Select presentations: American Economic Association (AEA) Annual Meetings 2024, NBER Public Economics Fall 2024, NBER Innovative Data in Household Finance Conference 2023, MIT Rising Scholars Conference, Georgetown University, Midwest Finance Association 2024.
We study fraud in the unemployment insurance (UI) system using a dataset of 35 million debit card transactions. We apply machine learning techniques to cluster cards corresponding to varying levels of suspicious or potentially fraudulent activity. We then conduct a difference-in-differences analysis based on the staggered adoption of state-level identity verification systems between 2020 and 2021 to assess the effectiveness of screening for reducing fraud. Our findings suggest that identity verification reduced payouts to suspicious cards by 27%, while non-suspicious cards were largely unaffected by these technologies. Our results indicate that identity screening may be an effective mechanism for mitigating fraud in the UI system and for benefits programs more broadly.
This figure shows that unemployment insurance benefits disbursed to suspicious cards declined after the introduction of identity verification measures.
[5] Process Innovation and the Corporate Control Market
Select presentations: Midwest Finance Association 2024, Northern Finance Association 2024, Eastern Finance Association 2024, Financial Management Association 2023, University of Iowa.
Between a third to a fifth of all patents filed in the US seek process or operational improvement (figure on the right). We show that specificity of process innovation affects merger decisions. We measure the composition of a firm’s innovation portfolio by machine-reading 90 million patent claims and show that firms with a higher share of process innovation generate more firm-specific knowledge. While process innovation is value-enhancing for the stand-alone firm, its specificity reduces synergistic gains from an acquisition. Consistent with the specificity explanation, the negative effect of process innovation on acquisition likelihood is dampened if the bidder manufactures similar products and, therefore, can apply the target’s innovative processes to its own product line. Our study provides the first large-sample evidence on the fungibility of innovation and its impact on mergers and acquisitions.
This figure plots the average share of process claims over the years 1980 through 2020. We identify process claims using a machine-read textual classification algorithm.