I have an insane, convoluted theory. It's most assuredly wrong, but it was fun to think about.
Coop inadvertently "created" Judy the moment he tried to rescue Laura in 1989. Judy is born from the endless loop of misery Sarah Palmer experiences when the sorrow of losing Laura is stripped away from her. I think this is foreshadowed in Sarah's addiction issues and that loop of the boxing match. Basically, Sarah grows addicted to the "garmonbozia" the trauma she experienced provides, and when that is stripped away from her by Coop, the trauma is increased infinity-fold when she's caught in that loop. In that prison, she transforms into an "extreme negative force," not bound by the constraints of time or reality.
In this form, she even has the power to self-actualize, ensuring that "all proceeds cyclically," and that the object of her pain and sorrow is both born and killed. With the detonation of the atom bomb she gives birth to both BOB and and the frogmoth that will possess her childhood self.
By spiriting Laura away to a new dream reality, she is able to remain in that loop, preventing the rosy future where Laura never dies. With the help of the Fireman and the White Lodge, however, Coop is able to brave this alternate reality and bring Laura home. Doing so breaks the the dream world and the loop, destroying Judy, and ensuring that all of the things she willed into existence never happened.
Sarah calls out to Laura, who wakes from her nightmare with a scream, into a reality where BOB never possessed Leland and Sarah never became Judy.