Demand Heterogeneity and Economic Value: An Evaluation of the OTC Derivatives Market
International Review of Business Research Papers
Vol. 12. No. 1. , March 2016, Pages: 17 – 28Demand Heterogeneity and Economic Value: An Evaluation of the OTC Derivatives Market
This paper provides a framework to show that the OTC derivatives market is important for improving the welfare of market participants. This framework is built on the idea that heterogeneity of market participants is the basis for innovations in financial products. The OTC market provides a flexible structure to make it possible for firms and their heterogeneous clients to trade in new products. The data provided in this paper support this framework.JEL Codes: D61, G14, L51