Traditional liquidity measures can provide a false impression of the liquidity and stability of financial market trading. Using data on auctions (bids wanted in competition; BWICs) from the collateralized loan obligation (CLO) market, we show that a standard measure of liquidity, the effective...

In the event of a clearing member's default, and as part of its default management process, a central counterparty (CCP) will need to hedge the defaulter's portfolio and to close-out its positions. However, the CCP may not be able to do this without incurring additional losses if the market is...

I study dispersion of CDS premia in a theoretical over-the-counter (OTC) economy. Agents have heterogeneous expectations about counterparty and reference entity default rates. In equilibrium, spreads of CDS contracts vary based on counterparty characteristics even if reference entity risk is...

This thesis analyzes the interrelation between market structure and price formation in credit derivatives markets. Traditionally, credit derivatives are traded in relatively opaque over-thecounter markets in which trading is segmented and subject to many imperfections from which illiquidity may...

Many observers have argued that credit default swaps contributed significantly to the credit crisis. Of particular concern to these observers are that credit default swaps trade in the largely unregulated over-the-counter market as bilateral contracts involving counterparty risk and that they...

Many observers have argued that credit default swaps contributed significantly to the credit crisis. Of particular concern to these observers are that credit default swaps trade in the largely unregulated over-the-counter market as bilateral contracts involving counterparty risk and that they...

This article proposes several simple financial market reforms that can help regulators both identify systemically risky institutions and mitigate the systemic risk associated with derivative trading, especially trading in credit derivatives such as credit default swaps.The Federal Reserve (or...

Many observers have argued that credit default swaps contributed significantly to the credit crisis. Of particular concern to these observers are that credit default swaps trade in the largely unregulated over-the-counter market as bilateral contracts involving counter-party risk and that they...