Marco Di Maggio, Amir Kermani, Zhaogang Song, 26 November 2016

The Global Crisis of 2008 highlighted the role of intertwined financial markets in shaping the transmission of risk and the build-up of fragility throughout the system. This column investigates the role of dealer networks in the corporate bond market. Network relationships appear to act as a buffer in periods of distress, but also accentuate systemic fragility as connections with vulnerable dealers might affect trading outcomes even for sound dealers.

Darrell Duffie, Piotr Dworczak, Haoxiang Zhu, 16 February 2015

Trillions of dollars’ worth of transactions depend on financial benchmarks such as LIBOR, but recent scandals have called their reliability into question. This column argues that reliable benchmarks reduce informational asymmetries between customers and dealers, thereby increasing the volume of socially beneficial trades. Indeed, the increase in trading volume may offset the reduction in profit margins, giving dealers who can coordinate an incentive to introduce benchmarks. The authors argue that benchmarks deserve strong and well-coordinated support by regulators around the world.

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