FX Counterparty Risk and Trading Activity in Currency Forward and Futures Markets
The 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.
|Date of creation:||Jul 2012|
|Date of revision:|
|Publication status:||published as “FX Counterparty Risk and Trading Activity in Currency Forward and Futures Markets,” Review of Financial Economics, September 2012, Vol. 21, No. 3, pp. 102-110.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Niall Coffey & Warren B. Hrung & Asani Sarkar, 2009. "Capital constraints, counterparty risk, and deviations from covered interest rate parity," Staff Reports 393, Federal Reserve Bank of New York.
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BIS Working Papers
267, Bank for International Settlements.
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