Post by Sapphire Capital on Feb 7, 2009 5:05:52 GMT 4
Filling a Regulatory Gap: It is Time to Regulate Over-the-Counter Derivatives
Thomas Lee Hazen
University of North Carolina at Chapel Hill - School of Law
UNC Legal Studies Research Paper No. 1338339
13 N.C. Banking Inst. ---- (2009)
Abstract:
The recent credit crisis has highlighted the lack of regulation for credit default swaps that has both magnified and contributed to market failure that began in the latter half of 2008. Securities regulation covers most types of investment contracts, but currently does not include non-securities based derivative contracts such as credit default swaps. The unique aspect of credit default swaps is that unlike other risk shifting contracts such as insurance, they are not regulated. The regulatory framework lacks a consistent approach in dealing with risk shifting and hedging devices. The degree of regulation is based on the form of the instrument rather than on the substance of the risk shifting transactions. This essay is an abridged and updated version of a 2005 article that questioned the wisdom of deregulation in the derivatives markets that has taken place since the early 1990s.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1338339_code49897.pdf?abstractid=1338339&mirid=1
Thomas Lee Hazen
University of North Carolina at Chapel Hill - School of Law
UNC Legal Studies Research Paper No. 1338339
13 N.C. Banking Inst. ---- (2009)
Abstract:
The recent credit crisis has highlighted the lack of regulation for credit default swaps that has both magnified and contributed to market failure that began in the latter half of 2008. Securities regulation covers most types of investment contracts, but currently does not include non-securities based derivative contracts such as credit default swaps. The unique aspect of credit default swaps is that unlike other risk shifting contracts such as insurance, they are not regulated. The regulatory framework lacks a consistent approach in dealing with risk shifting and hedging devices. The degree of regulation is based on the form of the instrument rather than on the substance of the risk shifting transactions. This essay is an abridged and updated version of a 2005 article that questioned the wisdom of deregulation in the derivatives markets that has taken place since the early 1990s.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1338339_code49897.pdf?abstractid=1338339&mirid=1