An international initiative to increase the use of central clearing for OTC derivatives emerged as one of the reactions to the 2008 financial crisis. The move to central clearing is a fundamental change in the structure of the market. Central clearing will help control counterparty credit risk,...

Central counterparties (CCPs) are becoming central to over-the-counter (OTC) markets. A CCP limits counterparty risk but raises entry barriers. We analyze the trade-off between dealers' equilibrium default risk and competition in an OTC market with imperfect competition and endogenous default...

We present a method for identifying and estimating the gains from trade in limit order markets and provide new empirical evidence that the limit order market is a good market design. The gains from trade in our model arise because traders have different valuations for the stock. We use...