There is an increasing likelihood that governments of major economies will act within the next decade to reduce greenhouse gas emissions, probably by intervening in the fossil fuel markets through taxation or cap \& trade mechanisms (collectively ``carbon pricing''). We develop a model to...

We consider over-the-counter (OTC) transactions with bilateral default risk, and study the optimal design of the Credit Support Annex (CSA). In a setting where agents have access to a trading technology, default penalties and collateral costs arise endogenously as a result of foregone investment...