Journal of Financial Intermediation Vol. 4 No. 2 1995
Advantages to Competing with Yourself: Why an Exchange Might Design Futures Contracts with Correlated Payoffs
Abstract
This paper examines the form of futures contracts which a monopolistic exchange will offer to maximise transaction revenue when transaction fees are endogenously determined. We establish the desirable characteristics of participants in contracts. For example, we show that contracts which appeal to hedgers on one side of the market and to speculators on the other are desirable. In contrast to earlier work, we show that the sequentially selected set of contracts may not be optimal. It may be desirable for the exchange to offer correlated contracts, or even to bundle several contracts together and sell the bundled contract at a fee lower than the fee charged for the set of contracts purchased separately. Journal of Economic Literature Classification Numbers: G13, G20.
- DOI
- 10.1006/jfin.1995.1007
- Volume
- 4
- Issue
- 2
- Pages
- 133-157
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref