The quick answer is liquidity and counterparty risk.
The inflow is the result of the foreign exchange contract as the counterparty attempts to rebalance their currency exposure.
The use of an agent can result in damages, which can lead to an action by the counterparty who has suffered the damages in order to obtain compensation.
Similarly, in an infinite-horizon model it is difficult to see why any counterparty would want the present discounted value of its terminal debt to be strictly positive.
Such a process introduces counterparty risk.
The counterparty must therefore have commensurate size or resources, which means in practice a large fund, perhaps associated with a bank, to provide the necessary long-term credit comfort.
The investors, however, acquire counterparty risk.
In a first stage, we will present legislation to standardise eligible derivatives contracts, putting them through central counterparty clearing that is properly regulated and supervised.
