EconPapers    
Economics at your fingertips  
 

The Market for OTC Derivatives

Andrew Atkeson, Andrea Eisfeldt and Pierre-Olivier Weill ()

No 9403, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: credit default swaps; dealers; OTC markets (search for similar items in EconPapers)
JEL-codes: D83 G00 (search for similar items in EconPapers)
Date: 2013-03
New Economics Papers: this item is included in nep-ban and nep-fmk
References: View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9403 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: The market for OTC derivatives (2013) Downloads
Working Paper: The Market for OTC Derivatives (2013) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:9403

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=9403

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2020-09-14
Handle: RePEc:cpr:ceprdp:9403