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 spent 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
Select presentations: AFA, NBER, European FA, SFS Cavalcade North America, Office of Financial Research Rising Scholars, FMA CBOE Derivatives & Volatility, Midwest FA, Indiana University, Princeton, Columbia, Bank of Canada, Bank of England, Swiss National Bank, Fed Board, AFA 2024 poster.
Grants: Inquire Europe Research Grant, 2024, AFA PhD Travel Grant, 2024
Coverage: Bank Underground
Abstract (click here):
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 that pension funds and insurers (in green) receive fixed rates using interest rate swaps. On the other hand, banks (in grey) and corporations (in light purple) pay fixed rates. Opposite exposures makes these institutions natural counterparties in the swap market. However, we find a stark maturity segmentation, which strongly impacts asset prices.
Select presentations: Office of Financial Research PhD Symposium, Federal Reserve Bank of Atlanta (joint with Georgia State University), CFTC, Bank for International Settlements, University of Zurich, Midwest FA, AFA 2025 poster.
Grants: AFA PhD Travel Grant, 2025, Midwest FA Travel Grant, 2025
Abstract (click here):
Despite their higher cost and hidden leverage, off-balance sheet foreign exchange (FX) swaps play a critical role in providing short-term dollar funding to large global banks. Yet, the frictions that lead banks to rely on these instruments and their asset pricing implications are not well understood. 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. This shift in aggregate demand is absorbed by non-bank users of FX derivatives in the form of higher hedging costs: I estimate the elasticity of non-bank investors' hedging demand to swap prices and find only a partial adjustment in quantities traded. My results indicate that frictions in the global market for the US dollar can provide a demand-based explanation for CIP deviations.
This figure correlates the dollar funding gap of non-US banks (excess of dollar assets over liabilities, in red) with deviations from covered interest parity (CIP, in black). When non-US banks face frictions in sourcing US dollars from wholesale funding markets, they turn to the foreign exchange swap market, which worsens deviations from CIP.
[3] Uninformed yet Consequential: Liquidity Shocks in FX Markets
Select presentations: Western Finance Association (WFA), 4th Future of Financial Information Conference, Central Bank Conference in Microstructure of Financial Markets, University of Missouri.
Grant: Tippie Research Excellence Grant, 2021
Abstract (click here):
We study how retail liquidity shocks impact prices and volumes in the foreign exchange (FX) spot market. We model risk-averse dealers' accumulation of inventory under asymmetric information and incomplete offset across retail clients. Our model predicts that retail liquidity shocks result in inventory imbalances that are transmitted to the inter-dealer segment, increasing price volatility and trading volumes. Using month-end settlement breaks to instrument for uninformed order flow, we empirically validate these predictions: a one-standard-deviation rise in retail net volume increases volatility by 12-22% and inter-dealer volume by 10%, indicating that liquidity-driven demand interacts with intermediary constraints to determine asset prices.
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), NBER Public Economics, NBER Innovative Data in Household Finance Conference, MIT Rising Scholars Conference, Georgetown University, Midwest FA.
Abstract (click here):
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 FA, Northern FA, Eastern FA, FMA, University of Iowa.
Abstract (click here):
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 shows that patents that seek to achieve process improvements, as opposed to the creation of new products, constitute 20-30% of all patents filed in the United States.