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- W2513505566 abstract "This paper explores how organization and contract design has evolved to address regulatory challenges in risk management. In the early part of the century, futures exchanges responded to credit risks by developing clearinghouses that act as guarantors. The liability structure of the clearinghouse involves mutualization of risks through partial permanent integration of the exchange members. Bank clearinghouses historically involved contingent integration and risk mutualization during panics. Recent organizational innovations have allowed the risk-control benefits of the clearinghouse to be replicated in the decentralized over-the-counter derivatives markets. Credit rating agencies and advances in risk modeling are key to permitting the recent dis-integration, which has implications for the scope of public versus private regulation in banking and financial markets. WHETHER MARKET FORCES WOULD PROVIDE SUFFICIENT INCENTIVES to produce adequate self-regulation of financial institutions and markets is a hotly debated issue. This paper explores how innovations in organizational and contractual design and governance for financial institutions and markets have evolved privately to address regulatory challenges, particularly with respect to risk control and risk management. The specific focus is the origins and development of clearinghouses at futures exchanges and the recent organizational innovations that have allowed the same risk-control benefits of an organized clearinghouse to be replicated in the rapidly growing and highly decentralized over-the-counter (OTC) derivatives markets. I choose this focus for four reasons. First, the historical development of futures clearinghouses and how they address issues of risk has been largely overlooked in the" @default.
- W2513505566 created "2016-09-16" @default.
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- W2513505566 date "2016-01-01" @default.
- W2513505566 modified "2023-09-27" @default.
- W2513505566 title "The Development of Derivatives Clearinghouses and Recent Over-the-Counter Innovations" @default.
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