default must lead to a tightening of liquidity provision. -- Clearing ; OTC vs Exchanges ; Private Information ; Liquidity …-term credit that is periodically cleared by participants. We study efficient clearing arrangements for formal exchanges, where … clearing is costly, we show that it can be efficient to subsidize the clearing process for OTC transactions by charging a …

We investigate the effects of introducing a central clearing counterparty (CCP) on securities prices by adopting as an …

Recent regulation, mandating the clearing of credit default swaps (CDS) by a Central Clearing Counterparties (CCP), has … CCP initiated by the default of a large dealer bank and the unwinding of its positions. The theoretical model examines … profits of all members, pushing banks to default. Furthermore, a hybrid CCP (vs. current) structure provides a natural …

not, they may prefer bilateral clearing either to prevent strategic default or to optimize the allocation of costly …This paper studies the optimal clearing arrangement for bilateral financial contracts in which an assessment of …, at a cost, about the commitment of their borrowers, which affects the assessment of counterparty risk. Clearing through a …

Following the 2008 financial crisis, regulation mandates the clearing of the CDS market through Central Clearing …'s default and the ensuing default contagion. In unwinding the defaulter's positions, the CCP faces the price impact of …

reluctance to clear derivative trades in the absence of a central clearing obligation. We develop a comprehensive understanding … moving from a bilateral to a clearing architecture for derivative markets. Previous studies suggest that central clearing is … beneficial for single market participants in the presence of a sufficiently large number of clearing members. We show that three …

Bilateral financial contracts typically require an assessment of counterparty risk. Central clearing of these financial … and to reveal information about such risk. When considering this trade-off, participants would choose central clearing if … information acquisition is incentive compatible. If it is not, they may prefer bilateral clearing, when this choice prevents …

, they may prefer bilateral clearing to prevent strategic default by borrowers and to economize on costly collateral. Central …This paper adopts a mechanism design approach to study optimal clearing arrangements for bilateral financial contracts … lender to acquire such information. Central clearing of these financial contracts through a central counterparty (CCP) allows …