AbstractPolicy makers and market participants alike wish to understand the amount, economic significance, and concentration of derivatives trading activity. This paper suggests that systematic measuring and reporting of margin by market participants, disaggregated by asset class, would provide more meaningful insights into derivatives activity. Where margin is not required, it could nevertheless be imputed and reported. The Dodd-Frank financial reform bill, by contrast, moves away from transparency by granting non-financial firms an end-user exemption from posting initial margin on their trades. This is economically equivalent to a borrowing from the counterparty and effectively permits these firms to issue off-balance-sheet debt.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18724.
Date of creation: Jan 2013
Date of revision:
Publication status: Forthcoming: Measuring Margin , Robert L. McDonald. in Risk Topography: Systemic Risk and Macro Modeling , Brunnermeier and Krishnamurthy. 2014
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Find related papers by JEL classification:
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-26 (All new papers)
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"Market Liquidity and Funding Liquidity,"
CEPR Discussion Papers
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- Markus K. Brunnermeier & Lasse Heje Pedersen, 2007. "Market Liquidity and Funding Liquidity," NBER Working Papers 12939, National Bureau of Economic Research, Inc.
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