Over-the-counter credit derivatives are private contractsbetween two companies; is it appropriate for the government to force them to be soldon regulated exchanges like commodities are? Why or why not?

Over-the-counter credit derivatives are private contractsbetween two companies; is it appropriate for the government to force them to be soldon regulated exchanges like commodities are? Why or why not?

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance

Section: Chapter Questions

Problem 10QFR

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Question

Over-the-counter credit derivatives are private contracts
between two companies; is it appropriate for the government to force them to be sold
on regulated exchanges like commodities are? Why or why not?

Expert Solution

Step 1

An OTC {"over-the-counter"} derivative is described as a 'financial contract' arranged between the 2 counterparties but has minimal regulation or intermediation. These derivatives are not listed on an exchange or trade of assets and do not have standardized/ particular terms.

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