Published in:Office of Financial Research Research Paper ; No. 18-05
Extent:
1 Online-Ressource (65 p)
Language:
English
DOI:
10.2139/ssrn.3245966
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 29, 2018 erstellt
Description:
We estimate the systemic effects of exit by a key over-the-counter (OTC) intermediary. In our model, risk-averse traders are connected by a core-periphery network. If traders are also averse to concentrated bilateral exposures then the incomplete network prevents full risk sharing. We quantify the impact of the network structure on prices using the closed-form solution to our model and proprietary data on all credit default swap (CDS) transactions in the U.S. from 2010-2013. There are a small number of key OTC intermediaries whose exit can move markets dramatically. Eliminating one of these leads credit spreads to increase over 20%