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Over-the-Counter Markets / Darrell Duffie, Nicolae Garleanu, Lasse Heje Pedersen.
- Format:
- Book
- Author/Creator:
- Duffie, Darrell.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w10816.
- NBER working paper series no. w10816
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2004.
- Summary:
- We study how intermediation and asset prices in over-the-counter markets are affected by illiquidity associated with search and bargaining. We compute explicitly the prices at which investors trade with each other as well as marketmakers' bid and ask prices in a dynamic model with strategic agents. Bid-ask spreads are lower if investors can more easily find other investors, or have easier access to multiple marketmakers. With a monopolistic marketmaker, bid-ask spreads are higher if investors have easier access to the marketmaker. We characterize endogenous search and welfare, and discuss empirical implications.
- Notes:
- Print version record
- October 2004.
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