Publications
Publications
- 2018
OTC Intermediaries
By: Andrea L. Eisfeldt, Bernard Herskovic, Sriram Rajan and Emil Siriwardane
Abstract
Over-the-counter (OTC) markets for financial assets are dominated by a relatively small number of core intermediaries and a large number of peripheral customers. In this paper, we develop a model of trade in a core-periphery network and estimate its key structural parameters using proprietary credit default swap data from the Depository Trust & Clearing Corporation (DTCC). Using our calibrated model, we provide quantitative estimates of: (1) the effect of network frictions on the level of OTC derivatives prices; (2) the key determinants of cross sectional dispersion in bilateral prices; and (3) how prices and risk-sharing change in response to the failure of a dealer.
Keywords
OTC Markets; Intermediaries; Dealers; Credit Default Swaps; Risk Sharing; Networks; Price; Risk and Uncertainty
Citation
Eisfeldt, Andrea L., Bernard Herskovic, Sriram Rajan, and Emil Siriwardane. "OTC Intermediaries." Working Paper, August 2018.