Diverging derivatives: Law, governance and modern financial markets
This paper examines the institutional, political and regulatory history of U.S. derivatives markets from the 1980s until the financial crisis of 2008 to understand the divergence between exchange-traded derivatives and over-the-counter derivatives. Although exchanges like the Chicago Mercantile Exchange and Chicago Board of Trade were powerful market incumbents with strong political connections, they were eclipsed by the over-the-counter market. The latter remained unregulated, despite numerous attempts to do so, and grew to enormous size. With such growth, the political decision not to regulate became increasingly irreversible, even in the face of events like the failure of Long Term Capital Management. The implications for law and the politics of financial regulation are discussed.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Stulz, Rene M., 2004.
"Should We Fear Derivatives?,"
Working Paper Series
2004-5, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- Franklin R. Edward, 1999. "Hedge Funds and the Collapse of Long-Term Capital Management," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 189-210, Spring.
- Darrell Duffie, 2010.
"The Failure Mechanics of Dealer Banks,"
Journal of Economic Perspectives,
American Economic Association, vol. 24(1), pages 51-72, Winter.
- Kroszner, Randall S, 1999. "Can the Financial Markets Privately Regulate Risk? The Development of Derivatives Clearinghouses and Recent Over-the-Counter Innovations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 596-618, August.
- Franklin R. Edwards & Frederic S. Mishkin, 1995.
"The decline of traditional banking: implications for financial stability and regulatory policy,"
Economic Policy Review,
Federal Reserve Bank of New York, issue Jul, pages 27-45.
- Franklin R. Edwards & Frederic S. Mishkin, 1995. "The Decline of Traditional Banking: Implications for Financial Stabilityand Regulatory Policy," NBER Working Papers 4993, National Bureau of Economic Research, Inc.
- Tufano, Peter, 1989. "Financial innovation and first-mover advantages," Journal of Financial Economics, Elsevier, vol. 25(2), pages 213-240, December.
- Telser, Lester G, 1981. "Why There Are Organized Futures Markets," Journal of Law and Economics, University of Chicago Press, vol. 24(1), pages 1-22, April.
- Keith C. Brown & Donald J. Smith, 1993. "Default Risk and Innovations in the Design of Interest Rate Swaps," Financial Management, Financial Management Association, vol. 22(2), Summer.
- Gary Gorton & Richard Rosen, 1995.
"Banks and Derivatives,"
in: NBER Macroeconomics Annual 1995, Volume 10, pages 299-349
National Bureau of Economic Research, Inc.
- Gary Gorton & Richard Rosen, . "Banks and Derivatives," Rodney L. White Center for Financial Research Working Papers 6-95, Wharton School Rodney L. White Center for Financial Research.
- Gary Gorton & Richard Rosen, 1995. "Banks and derivatives," Working Papers 95-12, Federal Reserve Bank of Philadelphia.
- Gary Gorton & Richard Rosen, 1995. "Banks and Derivatives," NBER Working Papers 5100, National Bureau of Economic Research, Inc.
- Gary Gorton & Richard Rosen, 1995. "Banks and Derivatives," Center for Financial Institutions Working Papers 95-07, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Gary Gorton & Richard Rosen, . "Banks and Derivatives," Rodney L. White Center for Financial Research Working Papers 06-95, Wharton School Rodney L. White Center for Financial Research.
- Scholes, Myron S, 1998.
"Derivatives in a Dynamic Environment,"
American Economic Review,
American Economic Association, vol. 88(3), pages 350-70, June.
- Philippe Jorion, 2010. "Risk Management," Annual Review of Financial Economics, Annual Reviews, vol. 2(1), pages 347-365, December.
- Robert A. Jarrow, 2011. "The Economics of Credit Default Swaps," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 235-257, December.
- Gorton, Gary B., 2010. "Slapped by the Invisible Hand: The Panic of 2007," OUP Catalogue, Oxford University Press, number 9780199734153, March.
- Stephen Cecchetti & Enisse Kharroubi, 2012. "Reassessing the impact of finance on growth," BIS Working Papers 381, Bank for International Settlements.
- Rainelli, Hélène & Huault, Isabelle, 2009. "Market shaping as an answer to ambiguities. The case of credit derivatives," Economics Papers from University Paris Dauphine 123456789/263, Paris Dauphine University.
- William Lazonick, 2010. "Innovative Business Models and Varieties of Capitalism: Financialization of the U.S. Corporation," Business History Review, Harvard Business School, vol. 84(4), pages 675–702, December.
- Reena Aggarwal & Sandeep Dahiya, 2006. "Demutualization and Public Offerings of Financial Exchanges," Journal of Applied Corporate Finance, Morgan Stanley, vol. 18(3), pages 96-106.
- Tett, G., 2010. "Silos and silences. Why so few people spotted the problems in complex credit and what that implies for the future," Financial Stability Review, Banque de France, issue 14, pages 121-129, July.
- Raghuram G. Rajan, 2005.
"Has Financial Development Made the World Riskier?,"
NBER Working Papers
11728, National Bureau of Economic Research, Inc.
- Raghuram G. Rajan, 2005. "Has financial development made the world riskier?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 313-369.
- Eli M. Remolona, 1992. "The recent growth of financial derivative markets," Quarterly Review, Federal Reserve Bank of New York, issue Win, pages 28-43.
When requesting a correction, please mention this item's handle: RePEc:eee:jcecon:v:41:y:2013:i:2:p:386-400. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.