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OTC Derivatives and Global Economic Activity: An Empirical Analysis

Johns Hopkins School of Advanced International Studies, The Johns Hopkins University, Washington, DC 20036, USA
Author to whom correspondence should be addressed.
Academic Editor: Donald Lien
J. Risk Financial Manag. 2017, 10(2), 13;
Received: 6 April 2017 / Revised: 25 May 2017 / Accepted: 7 June 2017 / Published: 14 June 2017
(This article belongs to the Special Issue Financial Derivatives and Hedging)
That the global market for derivatives has expanded beyond recognition is well known. What is not know is how this market interacts with economic activity. We provide the first empirical characterization of interdependencies between OECD economic activity and the global OTC derivatives market. To this end, we apply a vector-error correction model to OTC derivatives disaggregated across instruments and counterparties. The results indicate that with one exception, the heterogeneity of OTC contracts is too pronounced to be reliably summarized by our measures of economic activity. The one exception is interest-rate derivatives held by Other Financial Institutions. View Full-Text
Keywords: over the counter derivatives; economic activity; cointegration over the counter derivatives; economic activity; cointegration
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Bodnar, G.; Fortun, J.; Marquez, J. OTC Derivatives and Global Economic Activity: An Empirical Analysis. J. Risk Financial Manag. 2017, 10, 13.

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