As part of a G20 commitment to improve transparency and mitigate systemic risk in derivatives markets, many OTC derivatives will be required to be traded on exchanges or electronic platforms by the end of 2012. It is important that liquidity on the new trading platforms is resilient, both during...

I study a hybrid over-the-counter (OTC) market structure in which traders have the choice of obtaining an asset from dealers either in a bilateral market or on an electronic trading platform. In a hybrid market (HM), turnover is higher and traders are better off than in a pure bilateral market...

I construct a model of over-the-counter (OTC) trading to study equilibrium allocation properties under bilateral clearing (BC) and central counterparty (CCP) clearing of OTC derivatives. I show how CCP mutualizes individual counterparty exposures and prevents massive equilibrium defaults. I...