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Dark Markets: Asset Pricing and Information Transmission in Over-the-Counter Markets

Darrell Duffie

Abstract

Over-the-counter (OTC) markets for derivatives, collateralized debt obligations, and repurchase agreements played a significant role in the global financial crisis. Rather than being traded through a centralized institution such as a stock exchange, OTC trades are negotiated privately between market participants who may be unaware of prices that are currently available elsewhere in the market. In these relatively opaque markets, investors can be in the dark about the most attractive available terms and who might be offering them. This opaqueness exacerbated the financial crisis, as regulators ... More

Keywords: over-the-counter market, OTC market, derivatives, debt, repurchase, global financial crisis, OTC trades

Bibliographic Information

Print publication date: 2012 Print ISBN-13: 9780691138961
Published to University Press Scholarship Online: October 2017 DOI:10.23943/princeton/9780691138961.001.0001

Authors

Affiliations are at time of print publication.

Darrell Duffie, author
Stanford University