Model mismatch

The use of over-the-counter (OTC) derivative trades continues to grow significantly. Surveys, articles and conferences continually testify to growing volume of credit default swaps, OTC equity options and other OTC trades and the increasing complexity of trading through the use of hybrid and exotic forms of these transactions.

As increasing levels of institutional capital have moved into strategies employing OTC trades, as identified in The Bank of New York/Casey Quirk and Acito study, Instit

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