| Item Type |
Conference or Workshop Item
(Paper)
|
| Abstract |
Using trade repository data at transaction and ID levels, we provide the first systematic study of interest rate swaps traded over the counter in the new regulatory regime. We find substantial and persistent heterogeneity in derivatives prices consistent with a pass-through of regulatory costs on to market prices via the so-called valuation adjustments (XVA). Specifically, a client pays a higher price to buy interest-rate protection from a dealer (ie, the client pays a higher fixed rate) if the contract is not cleared via a central counterparty. This OTC premium decreases by posting initial margin and with higher buyer's creditworthiness. Also, OTC premia are absent for dealers suggesting dealers' bargaining power. |
| Authors |
Cenedese, Gino; Ranaldo, Angelo & Vasios, Michalis |
| Language |
English |
| Keywords |
Interest rate swaps, financial regulation, central celaring, over-the-counter market, valuation adjustments |
| Subjects |
finance |
| HSG Classification |
contribution to scientific community |
| HSG Profile Area |
SOF - System-wide Risk in the Financial System |
| Date |
6 November 2018 |
| Event Title |
Annual Central Bank Conference on Microstructure of Financial Markets |
| Event Location |
Hong Kong Institute for Monetary Research (HKIMR) of the Hong Kong Monetary Authority |
| Event Dates |
5-6 November 2018 |
| Depositing User |
Christina Ihasz
|
| Date Deposited |
29 Nov 2018 10:15 |
| Last Modified |
24 Feb 2022 01:25 |
| URI: |
https://www.alexandria.unisg.ch/publications/255890 |
OTC Premia
