Demand Heterogeneity and Economic Value: An Evaluation of the OTC Derivatives Market

Demand Heterogeneity and Economic Value: An Evaluation of the OTC Derivatives Market

Author: zant worldpress

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

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