The paper introduces a connection between the needs of exchanges to respond to the immediacy needs of their clientele and the need to manage the credit risks faced by exchange members. Queueing theory is used to represent the opportunity loss suffered by brokers engaging in multiple activities:...

In comparing trading platforms, most studies suggest that electronic systems lead price discovery, except perhaps in excessively volatile markets. A series of unusual events in 2006, sparking extreme volatility in natural gas futures trading, provide an ideal setting to revisit the resilience of...

This paper develops a model which explains how the creation of a futures clearinghouse allows traders to reduce default and economize on margin. We contrast the collateral necessary between bilateral partners with that required when multilateral netting occurs. Optimal margin levels are...

Multilateral netting offsets gross payment obligations among several counterparties with new transactions. By keeping a running total for monies owed between all participants, multilateral netting allows for three or more parties to reduce multiple transactions to a single pay or collect per...

It has been argued that underpriced federal deposit insurance provides incentives for insured institutions to increase the value of shareholder equity by expanding into activities that shift risk onto the deposit insurer. Derivative instruments have been used by firms to change their risk...

Does the cost of trading affect stock prices? Yes, according to the evidence in this article. The authors find that high costs seem to reduce the frequency of price reversals.