Business Commons^™

Regulation Of The Otc Derivatives Market: A Regulatory Proposal Of Cds, Erik Welin

WCBT Undergraduate Publications

According to many commentators the credit derivatives and especially CDS have been a leading cause to the development of the current financial crisis. During the last year, policy makers, regulators, and other commentators around the world have therefore focused their attention on how to regulate OTC derivatives and especially CDS.

The purpose of this paper is to analyze some of the proposed regulatory responses to OTC derivatives and especially CDS from an economic point of view. The paper proposes a twofold regulatory response. First it proposes that we return to the old common law rule of "rule against difference contracts". …

Stochastic Business Cycle Volatilities, Capital Accumulation And Economic Growth: Lessons From The Global Credit Market Crisis, Kwamie Dunbar

WCBT Faculty Publications

The recent global economic downturn in a number of economies was preceded by rising credit market risk brought on by a massive financial market failure. This paper develops a small open economy model that analyzes the interaction of business cycle volatilities with capital accumulation and the subsequent impacts on economic growth. We use a stochastic dynamic programming model to test the central hypothesis that rising volatility shocks is an inhibitor to capital accumulation and subsequently economic growth. The model illustrates that traditional capital-based growth models which assume a constant capital stock are not consistent with the business cycle variation in …