FX Counterparty Risk and Trading Activity in Currency Forward and Futures Markets
AbstractThe Global Financial Crisis initiated a period of market turbulence and increased counterparty risk for financial institutions. Even though the Dodd-Frank Act is likely to exempt interbank foreign exchange trading from a central counterparty mandate, market participants have the option to trade currency futures on existing futures markets which standardize counterparty risks. Evidence for the period 2005-11 indicates that the market share of currency futures trading has grown relative to the pre-crisis period. This shift may be the result of a perceived increase in counterparty risk among banks, as well as changes in relative trading costs or changes in other institutional factors.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18256.
Date of creation: Jul 2012
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- F31 - International Economics - - International Finance - - - Foreign Exchange
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-08-23 (All new papers)
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- Victoria Ivashina & David S. Scharfstein & Jeremy C. Stein, 2012.
"Dollar Funding and the Lending Behavior of Global Banks,"
NBER Working Papers
18528, National Bureau of Economic Research, Inc.
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