The market for OTC derivatives
AbstractWe develop a model of equilibrium entry, trade, and price formation in over-the-counter (OTC) markets. Banks trade derivatives to share an aggregate risk subject to two trading frictions: they must pay a fixed entry cost, and they must limit the size of the positions taken by their traders because of risk-management concerns. Although all banks in our model are endowed with access to the same trading technology, some large banks endogenously arise as “dealers,” trading mainly to provide intermediation services, while medium sized banks endogenously participate as “customers” mainly to share risks. We use the model to address positive questions regarding the growth in OTC markets as trading frictions decline, and normative questions of how regulation of entry impacts welfare.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 479.
Date of creation: 2013
Date of revision:
Other versions of this item:
- Andrew G. Atkeson & Andrea L. Eisfeldt & Pierre-Olivier Weill, 2013. "The Market for OTC Derivatives," NBER Working Papers 18912, National Bureau of Economic Research, Inc.
- Atkeson, Andrew & Eisfeldt, Andrea L. & Weill, Pierre-Olivier, 2013. "The Market for OTC Derivatives," CEPR Discussion Papers 9403, C.E.P.R. Discussion Papers.
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- G00 - Financial Economics - - General - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Darrell Duffie & Bruno Strulovici, 2012.
"Capital Mobility and Asset Pricing,"
Econometric Society, vol. 80(6), pages 2469-2509, November.
- Darrell Duffie & Bruno Strulovici, 2011. "Capital Mobility and Asset Pricing," NBER Working Papers 17296, National Bureau of Economic Research, Inc.
- Bruno Strulovici & Darrell Duffie, 2009. "Capital Mobility and Asset Pricing," 2009 Meeting Papers 87, Society for Economic Dynamics.
- Darrell Duffie & Bruno Strulovici, 2009. "Capital Mobility and Asset Pricing," Discussion Papers 1478, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Darrell DUFFIE & Semyon MALAMUD & Gustavo MANSO, .
"Information Percolation with Equilibrium Search Dynamics,"
Swiss Finance Institute Research Paper Series
09-02, Swiss Finance Institute.
- Darrell Duffie & Semyon Malamud & Gustavo Manso, 2009. "Information Percolation With Equilibrium Search Dynamics," Econometrica, Econometric Society, vol. 77(5), pages 1513-1574, 09.
- Larry Eisenberg & Thomas H. Noe, 2001. "Systemic Risk in Financial Systems," Management Science, INFORMS, vol. 47(2), pages 236-249, February.
- Gara M. Afonso, 2008.
"Liquidity and congestion,"
349, Federal Reserve Bank of New York.
- Shouyong Shi, 1996.
"A Divisible Search Model of Fiat Money,"
930, Queen's University, Department of Economics.
- Ana Babus & Péter Kondor, 2012.
"Trading and Information Diffusion in Over-the-Counter Markets,"
CEU Working Papers
2012_19, Department of Economics, Central European University, revised 09 Dec 2012.
- Peter Kondor & Ana Babus, 2013. "Trading and Information Diffusion in Over-the-Counter Markets," 2013 Meeting Papers 792, Society for Economic Dynamics.
- Sergio Mayordomo & Juan Ignacio Peña Sánchez de Rivera & Eduardo S. Schwartz, 2010.
"Are all Credit Default Swap databases equal?,"
Business Economics Working Papers
wb104621, Universidad Carlos III, Departamento de Economía de la Empresa.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Janelle Ruswick).
If references are entirely missing, you can add them using this form.