The Market for OTC Derivatives
We develop a model of equilibrium entry, trade, and price formation in over-the- counter (OTC) markets. Banks trade derivatives to share an aggregate risk subject to two trading frictions: they must pay a fixed entry cost, and they must limit the size of the positions taken by their traders because of risk-management concerns. Although all banks in our model are endowed with access to the same trading technology, some large banks endogenously arise as "dealers," trading mainly to provide intermediation services, while medium sized banks endogenously participate as "customers" mainly to share risks. We use the model to address positive questions regarding the growth in OTC markets as trading frictions decline, and normative questions of how regulation of entry impacts welfare.
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.
|Date of creation:||Mar 2013|
|Date of revision:|
|Note:||AP EFG ME|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Peter Kondor & Ana Babus, 2013.
"Trading and Information Diffusion in Over-the-Counter Markets,"
2013 Meeting Papers
792, Society for Economic Dynamics.
- Ana Babus & Péter Kondor, 2012. "Trading and Information Diffusion in Over-the-Counter Markets," CEU Working Papers 2012_19, Department of Economics, Central European University, revised 09 Dec 2012.
- Darrell DUFFIE & Semyon MALAMUD & Gustavo MANSO, .
"Information Percolation with Equilibrium Search Dynamics,"
Swiss Finance Institute Research Paper Series
09-02, Swiss Finance Institute.
- Darrell Duffie & Semyon Malamud & Gustavo Manso, 2009. "Information Percolation With Equilibrium Search Dynamics," Econometrica, Econometric Society, vol. 77(5), pages 1513-1574, 09.
- Darrell Duffie & Bruno Strulovici, 2012.
"Capital Mobility and Asset Pricing,"
Econometric Society, vol. 80(6), pages 2469-2509, November.
- Bruno Strulovici & Darrell Duffie, 2009. "Capital Mobility and Asset Pricing," 2009 Meeting Papers 87, Society for Economic Dynamics.
- Darrell Duffie & Bruno Strulovici, 2009. "Capital Mobility and Asset Pricing," Discussion Papers 1478, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Darrell Duffie & Bruno Strulovici, 2011. "Capital Mobility and Asset Pricing," NBER Working Papers 17296, National Bureau of Economic Research, Inc.
- Shouyong Shi, 1996.
"A Divisible Search Model of Fiat Money,"
930, Queen's University, Department of Economics.
- Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
- Sergio Mayordomo & Juan Ignacio Peña & Eduardo S. Schwartz, 2010.
"Are all Credit Default Swap Databases Equal?,"
NBER Working Papers
16590, National Bureau of Economic Research, Inc.
- Afonso, Gara, 2011.
"Liquidity and congestion,"
Journal of Financial Intermediation,
Elsevier, vol. 20(3), pages 324-360, July.
- Larry Eisenberg & Thomas H. Noe, 2001. "Systemic Risk in Financial Systems," Management Science, INFORMS, vol. 47(2), pages 236-249, February.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:18912. 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: ()
If references are entirely missing, you can add them using this form.