LAEF OTC MARKETS Workshop

2017 participants

About the workshop

Most financial assets trade over-the-counter. They include fixed income, currency, derivatives, repo contracts, and securitized products. A typical over-the-counter market displays the following patterns:

• 1. Instead of a single price that clears the market, the terms of trade are specific to each transaction,

  2. Participants lack public information on who is trading with whom at what prices,

  3. Transactions involve intermediaries,

  4. Participants (both client and intermediary institutions) form a complex network of trading relationships with each other, and

  5. In transacting OTC, participants navigate a complex set of contractual and trading frictions (counterparty risk, asymmetric information, enforcement, reputation, search frictions, illiquidity, funding and margin costs, and so on).

With this backdrop, we explored the following topics in past programs: Why markets are organized and assets designed the way they are? Why certain assets trade in decentralized vs. centralized markets and in opaque vs. transparent markets? How do networks look like in the data, how do trading relationships form, and what is the optimal network structure in mitigating frictions and contagion? What are the macroeconomic and asset pricing implications of these institutional and microstructure frictions and features?

We hope questions and answers raised during the workshop will help shape the policy discussion on how to improve OTC markets, the financial sector, and ultimately the allocation of capital across the economy.

2018 Program

2017 Program

2016 Program

Other LAEF Events