Fontaine, Jean-Sébastien; Saiz, Héctor Pérez; Slive, … - Bank of Canada - 2012
We model the behavior of dealers in Over-the-Counter (OTC) derivatives markets where a small number of dealers trade with a continuum of heterogeneous clients (hedgers). Imperfect competition and (endogenous) default induce a familiar trade-off between competition and risk. Increasing the number...