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

Arbeitspapier

This paper develops a model in which information losses may be an important part of the cost of an OTC derivatives dealer's failure. A dealer failure forces solvent counterparties of a failed dealer to seek replacement hedges with other dealers. However, by forcing good firms into the derivatives market, the failure provides camouflage for insolvent firms seeking to speculate with a dealer that does not know their credit status. The paper models this information loss and uses the model to quantitatively evaluate a range of scenarios. The results suggest that a market breakdown is unlikely but not quite impossible.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 96-6

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: Derivative securities ; Liquidity (Economics)

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Wall, Larry D. ; Tallman, Ellis W. ; Abken, Peter A.
• Ereignis: Veröffentlichung
• (wer): Federal Reserve Bank of Atlanta
• (wo): Atlanta, GA
• (wann): 1996

Weitere Informationen

• Handle: http://hdl.handle.net/10419/100758
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ