Frictional Intermediation in Over-the-Counter Markets

• 成果类型: Article
• 署名作者: Hugonnier, Julien; Lester, Benjamin; Weill, Pierre-Olivier
• 署名单位: Swiss Federal Institutes of Technology Domain; Ecole Polytechnique Federale de Lausanne; Swiss Finance Institute (SFI); Center for Economic & Policy Research (CEPR); Federal Reserve System - USA; Federal Reserve Bank - Philadelphia; University of California System; University of California Los Angeles; National Bureau of Economic Research
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdz037
• 发表日期: 2020
• 页码: 1432-1469
• 关键词: bid-ask spreads; liquidity; search; equilibrium; INFORMATION; MODEL

摘要

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.