Inventory Management, Dealers' Connections, and Prices in Over-the-Counter Markets

• 成果类型: Article
• 署名作者: Colliard, Jean-Edouard; Foucault, Thierry; Hoffmann, Peter
• 署名单位: Hautes Etudes Commerciales (HEC) Paris; European Central Bank
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13034
• 发表日期: 2021
• 页码: 2199-2247
• 关键词: bid-ask spreads; liquidity; DYNAMICS

摘要

We propose a new model of trading in over-the-counter markets. Dealers accumulate inventories by trading with end-investors and trade among each other to reduce their inventory holding costs. Core dealers use a more efficient trading technology than peripheral dealers, who are heterogeneously connected to core dealers and trade with each other bilaterally. Connectedness affects prices and allocations if and only if the peripheral dealers' aggregate inventory position differs from zero. Price dispersion increases in the size of this position. The model generates new predictions about the effects of dealers' connectedness and dealers' aggregate inventories on prices.