Seminar The Costs of Counterparty Risk in Long-Term Contracts Microeconomics Seminar Add to calendar 2025-01-21 14:00 2025-01-21 15:15 Europe/Rome The Costs of Counterparty Risk in Long-Term Contracts Seminar Room 3rd Floor Villa La Fonte YYYY-MM-DD Print Share: Share on Facebook Share on BlueSky Share on X Share on LinkedIn Send by email Scheduled dates Jan 21 2025 14:00 - 15:15 CET Seminar Room 3rd Floor, Villa La Fonte Organised by Department of Economics In this seminar, Natalia Fabra (Carlos III University) will present the paper 'The Costs of Counterparty Risk in Long-Term Contracts.' This paper studies buyers’ counterparty risk as a major market failure in long-term contracting, leading to inefficiently high prices, excessive risk, and under investment. This is especially relevant in sectors with capital-intensive, long-lived investments, and volatile spot prices, such as electricity markets, where it may undermine efforts to deploy renewable energy and hinder carbon-abatement goals. Eliminating counterparty risk using costly collateral may harm both buyers and sellers. Policy interventions aimed at boosting demand for long-term contracts, providing public guarantees, and allowing regulators to serve as counterparties, may be effective in as much as they tackle counterparty risk directly.