OTC Intermediaries-Reference-Cited by-同舟云学术

OTC Intermediaries

Published:2022-09-12 Issue:2 Volume:36 Page:615-677
ISSN:0893-9454
Container-title:The Review of Financial Studies
language:en
Short-container-title:

Author:

Eisfeldt Andrea L¹,Herskovic Bernard¹,Rajan Sriram²,Siriwardane Emil³

Affiliation:

1. University of California , Los Angeles, and NBER, USA

2. United States Department of the Treasury Office of Financial Research, , USA

3. Harvard Business School and NBER , USA

Abstract

Abstract We study the effect of dealer exit on prices and quantities in a model of an over-the-counter market featuring a core-periphery network with bilateral trading costs. The model is calibrated using regulatory data on the entire U.S. credit default swap (CDS) market between 2010 and 2013. Prices depend crucially on the risk-bearing capacity of core dealers, yet unlike standard models featuring a dealer sector, we allow for heterogeneity in dealer risk-bearing capacity. This heterogeneity is quantitatively important. Depending on how well dealers share risk, the exit of a single dealer can cause credit spreads to rise by 8 $\%$ to 24$\%$.

Publisher

Oxford University Press (OUP)

Subject

Economics and Econometrics,Finance,Accounting

Link

https://academic.oup.com/rfs/advance-article-pdf/doi/10.1093/rfs/hhac062/45948307/hhac062.pdf

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