Clearinghouses support financial trades by keeping records of transactions and by providing liquidity through short-term credit that is periodically cleared by participants. We study efficient clearing arrangements for formal exchanges, where traders must clear with a clearinghouse, and for over-the-counter (OTC) markets, where trades can be cleared bilaterally. When clearing is costly, we show...

We propose an equilibrium occupational choice model, where agents can choose to work in the real sector (become entrepreneurs) or in the financial sector (become dealers). Agents incur costs to become informed dealers and develop skills in valuing assets up for trade. The financial sector comprises an organized competitive exchange, where uninformed agents trade and an over-the-counter (OTC) ma...

Many small over-the-counter (OTC) markets with thinly-traded assets are prone to episodic volatility and market failure due to their high potential for predatory activity. The traders in these markets constitute a tight oligopoly and liquidity events become known to all parties quickly. However, these markets appear to function at relatively low spreads and market failure is rare. We show that ...

The Procter & Gamble Company (Procter & Gamble) herewith submits, in triplicate, comments in response to the final rule: labeling of oral and rectal over-the-counter (OTC) drug products containing aspirin and nonaspirin salicylates; Reye’s syndrome warning, published on April 17,2003 in the Federal Register (Vol. 68, No. 74, pages 18861-18869). Procter & Gamble, as a manufacturer and distributo...

Traders provide intermediation of two related financial assets—secured debt and the underlying collateral. Each asset is traded in its own over-the-counter trading network. Traders decide whether or not to be active in each network. We give conditions under which the financial connections between the two assets make this a game of strategic complements on two coupled networks: incentives to be ...

This paper provides a theory of endogenous leverage through rehypothecation in collateralized intermediation. Overcollateralization with an rehypothecation option arises as an optimal contract form between broker dealers and their clients to mitigate adverse selection on collateral quality. Such contract prevents the broker dealers from taking advantage of private information on collateral qual...

I examine the corporate bond market reaction to bond rating changes using newly available corporate bond transaction data from the over-the-counter (OTC) market. I document significant price responses to both downgrades and upgrades in the in two-day period surrounding announcements. Since numerous studies find no evidence of a stock price reaction do upgrades, my findings adds to the literatur...

Between the 1970's and the 1980's, the derivatives market flourished. Forwards, futures and options began to be regularly traded. According to information gathered by The Bank of International Settlements, at the end of April 2001 the value of over-the-counter (OTC) positions outstanding was over US$99 trillion, while the value of positions outstanding in organized exchanges was approximately U...

It is estimated that 40-90 % of women are exposed to medications during the course of their pregnancy, and 34% of women are medication free in the first trimester.2,50,76-81 Drug consumption is higher in pregnant women who engage in risk taking behaviour (e.g. smoking, alcohol, recreational drugs) and varies according to socioeconomic factors such as education, affluence and race.77 In one surv...

This dissertation studies the market microstructure of over-the-counter markets. All three chapters are based on the municipal (tax-exempt) bond market. However, the implications on price formation, price discovery and dealer’s market power can be generalized into the other OTC markets such as corporate bond and derivatives markets as well. In the first chapter “Price Clustering and Dealer’s Ma...