scholarly journals Frictional Intermediation in Over-the-Counter Markets

2019 ◽  
Vol 87 (3) ◽  
pp. 1432-1469 ◽  
Author(s):  
Julien Hugonnier ◽  
Benjamin Lester ◽  
Pierre-Olivier Weill
Keyword(s):  
Closed Form ◽  
Empirical Studies ◽  
Asset Markets ◽  
Solution Technique ◽  
Theoretic Model ◽  
Municipal Bonds ◽  
Over The Counter ◽  
Inventory Costs ◽  
Dealer Market ◽  
Total Welfare

Abstract We extend Duffie et al.’s (2005) search-theoretic model of over-the-counter (OTC) asset markets, allowing for a decentralized inter-dealer market with arbitrary heterogeneity in dealers’ valuations (or, equivalently, inventory costs). We develop a solution technique that makes the model fully tractable and allows us to derive, in closed form, theoretical formulas for key statistics analysed in empirical studies of the intermediation process in OTC markets. A calibration to the market for municipal bonds allows us to quantify important unobservable characteristics of this market, including the severity of search and bargaining frictions and the nature of heterogeneity across dealers. We use our calibrated model to study the effect of these market characteristics on total welfare and the distribution of gains from trade across customers and dealers.

Intraday behavior of market depth in a competitive dealer market: A note

2008 ◽  
Vol 28 (3) ◽  
pp. 294-307 ◽  
Author(s):  
Alex Frino ◽  
Andrew Lepone ◽  
Grant Wearin
Keyword(s):  
Market Depth ◽  
Dealer Market

Does internalization diminish the impact of quote aggressiveness on dealer market share?

2006 ◽  
Vol 15 (1) ◽  
pp. 108-131 ◽  
Author(s):  
Kee H. Chung ◽  
Chairat Chuwonganant ◽  
D. Timothy McCormick
Keyword(s):  
Market Share ◽  
Dealer Market ◽  
The Impact

Impact of economic data surprises on exchange rates in the inter-dealer market

2007 ◽  
Vol 8 (1) ◽  
pp. 5-15 ◽  
Author(s):  
Jessica James ◽  
Kristjan Kasikov
Keyword(s):  
Exchange Rates ◽  
Economic Data ◽  
Dealer Market
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