Virtually nonexistent a decade ago, the over-the-counter market for interest rate derivatives has grown at a phenomenal pace in recent years to become an increasingly important part of world securities markets. Although these instruments offer firms obvious benefits in managing their cash flows,...

The rapid growth of the market for interest rate swaps and other over-the-counter derivatives has spurred considerable controversy. Many observers have expressed concern that these instruments may increase risk and threaten the stability of financial markets. Current research into the uses of...