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Keywords:Over-the-counter markets 

Reforming the OTC derivatives market

Remarks at the Harvard Law School's Symposium on Building the Financial System of the 21st Century, Armonk, New York.
Speech , Paper 77

Title II resolution, a useful tool but not a panacea

Remarks at 2013 Resolution Conference: Planning for the Orderly Resolution of a Global Systemically Important Bank, Washington, D.C.
Speech , Paper 121

Working Paper
Frictional Intermediation in Over-the-Counter Markets

We extend Duffie, G?arleanu, and Pedersen?s (2005) search theoretic model of over-the-counter (OTC) asset markets, allowing for a decentralized inter-dealer market with arbitrary heterogeneity in dealers? valuations or inventory costs. We develop a solution technique that makes the model fully tractable and allows us to derive, in closed form, theoretical formulas for key statistics analyzed in empirical studies of the intermediation process in OTC markets. A calibration to the market for municipal securities reveals that the model can generate trading patterns and prices that are ...
Working Papers , Paper 19-10

Working Paper
The emergence and future of central counterparties

The authors explain why central counterparties (CCPs) emerged historically. With standardized contracts, it is optimal to insure counterparty risk by clearing those contracts through a CCP that uses novation and mutualization. As netting is not essential for these services, it does not explain why CCPs exist. In over-the-counter markets, as contracts are customized and not fungible, a CCP cannot fully guarantee contract performance. Still, a CCP can help: As bargaining leads to an inefficient allocation of default risk relative to the gains from customization, a transfer scheme is needed. A ...
Working Papers , Paper 10-30

Working Paper
An Information-Based Theory of Financial Intermediation

We advance a theory of how private information and heterogeneous screening ability across market participants shapes trade in decentralized asset markets. We solve for the equilibrium market structure and show that the investors who intermediate trade the most and interact with the largest set of counterparties must have the highest screening ability. That is, the primary intermediaries are those with superior information?screening experts. We provide empirical support for the model?s predictions using transaction-level micro data and information disclosure requirements. Finally, we study the ...
Working Paper , Paper 19-12

Conference Paper
The role of regulation in system stability

Proceedings , Paper 398

Conference Paper
Regulatory reforms to reduce financial fragility

Proceedings , Paper 1136

Conference Paper
The impact of a dealer's failure on OTC derivatives market liquidity during volatile periods

Proceedings , Paper 555

Conference Paper
On the credit risk of OTC derivative users

Proceedings , Paper 554


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