Instruments for credit risk transfer arise endogenously from and interact with optimizing behavior of their users. This is particularly true with credit derivatives which are usually OTC contracts between banks as buyers and sellers of credit risk. Recent literature, however, does not account for this fact when analyzing the effects of these instruments on banking. The present paper closes this...

1. First, a number of financial markets—often called over-the-counter or “OTC” markets—are actually best described by a typical search and bargaining model; in these markets, investors have to locate a counterparty themselves, and once they find a suitable trading partner the two are free to trade at any mutually agreeable price. Hence, these models represent the most natural framework to study...

In order to clear a new product or market, the key factor a CCP must consider is its ability to manage the risks the product or market presents including the risk of default. This would normally require: the CCP has access to accurate pricing and valuation data; a degree of contract standardisation; and sufficiently deep liquidity in the market (or in sufficiently close hedges) to facilitate de...

Financial institutions are increasingly using XML as a de-facto standard to represent and exchange information about their products and services. Their aim is to process transactions quickly, cost-effectively, and with minimal human intervention. Due to the nature of the financial industry, inconsistencies inevitably appear throughout the lifetime of a financial transaction and their resolution...

The underlying premise in most failure studies is that there exists a group of accounting and financial ratios of firms which distinguishes failed firms from nonfailed firms. Ex post facto classification analysis of OTC marker data one year, two years, three years, and four years prior to failure was used. Models incorporating Altman's variables were developed using discriminant, logit, and nea...

We are most grateful for the comments made by Earl (2014) on our paper, Frey and Gallus (2014). In particular, we are pleased that we can fully agree on the fundamental point we wanted to make: decisions by individuals (as well as by organizational units) do not map directly and in an unchanged way to the macro level. Rather, the aggregation process linking the microand the macro-level must be ...

In 1937, Ronald Coase argued that firms will exist only in environments in which firms perform better than markets could. To create space for firms, Coase suggested that some environments might be plagued by “transaction costs” that cause markets to perform poorly. Coase’s paper was to become the cornerstone of the economic theory of the firm (i.e., the “make or buy” decision: which activities ...

This paper proposes and evaluates a model of supply chains as networks of auctions. In this model, companies are represented according to the first level of the Supply Chain Council’s SCOR model and the trading strategy of the agents is adapted from a model proposed by Steiglitz and colleagues. Specifically, the highest level of SCOR treats a company as comprising three functions, namely Source...