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Entry and Exit in OTC Derivatives Markets / Andrew G. Atkeson, Andrea L. Eisfeldt, Pierre-Olivier Weill.
- Format:
- Book
- Author/Creator:
- Atkeson, Andrew
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w20416.
- NBER working paper series no. w20416
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2014.
- Summary:
- We develop a parsimonious model to study the equilibrium and socially optimal decisions of banks to enter, trade in, and possibly exit, an OTC market. Although we endow all banks with the same trading technology, banks' optimal entry and trading decisions endogenously lead to a realistic market structure comprised of dealers and customers with distinct trading patterns. We decompose banks' entry incentives into incentives to hedge risk and incentives to make intermediation profits. We show that dealer banks enter more than is socially optimal. In the face of large negative shocks, they may also exit more than is socially optimal when markets are not perfectly resilient.
- Notes:
- Print version record
- August 2014.
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