Information insensitive securities: the benefits of central counterparties
AbstractA role of CCPs that has been identified by policy makers as fostering liquidity and stability of OTC transactions, is to perform margin calls to adjust the available collateral posted for each participant's net position, following the marking to market of securities. In this framework, however, the perception that margin calls foster liquidity is incorrect: traders have even more incentives to acquire information about the securities' payoff so that fewer transactions, which would be welfare improving, are carried out.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 1032.
Date of creation: 2012
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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- Gorton, Gary & Pennacchi, George, 1990. " Financial Intermediaries and Liquidity Creation," Journal of Finance, American Finance Association, vol. 45(1), pages 49-71, March.
- Koeppl, Thorsten V. & Monnet, Cyril, 2008.
CFS Working Paper Series
2008/42, Center for Financial Studies (CFS).
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