Constructing a globalized over-the-counter financial market. Limits of performativity and problems of cognitive framing - The case of credit derivatives

The aim of the paper is to understand how one particular financial innovation, namely credit derivatives, has become a market and what kind of obstacles the promoters of the product have to face to achieve success. Following MacKenzie and Millo (2003) we focus on legitimacy issues taking into account moral, political, cultural and social dimensions as well as the question of performativity of economic theory. More specifically, we propose to study the emergence and the development of the market for credit derivatives, such as has been seen in France since the end of 1997. This market presents two major characteristics, which make it different from the options market studied by Baker (1984) and by Mac Kenzie and Millo (2003). The market for credit derivatives is an over the counter market- a market of contracts exchanged between parties without the intermediary of a central authority in charge of organising the exchanges. In addition, this is a trans-national market, basically concerning large financial institutions and, in particular, investment banks throughout the world. How was this market born? How did it come about and how does it continue to function? What is the role played by the financial theory of risk in this process? Those are the questions we address in the paper.