Portfolio choice and settlement frictions: A theory of endogenous convenience yields

• 成果类型: Article
• 署名作者: Bianchi, Javier; Bigio, Saki
• 署名单位: National Bureau of Economic Research; University of California System; University of California Los Angeles
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2026.106166
• 发表日期: 2026
• 关键词: LIQUIDITY PREMIUM; MARKET; search; MODEL; equilibrium; management; PRIVATE

摘要

We study settlement frictions that arise from the need to finance negative balances through an over-the-counter (OTC) market. We derive a closed-form expression for the endogenous convenience yield and show how it can be incorporated into a canonical portfolio problem. Using this framework, we examine how shifts in settlement frictions affect liquidity premia, the volume of overnight funding, the dispersion of market rates, and optimal portfolio allocations. From a normative perspective, we show that in the competitive equilibrium, investors may either over-or under-invest in liquid assets; moreover, both higher risk aversion and tighter aggregate liquidity increase the likelihood of under-accumulation. Finally, we apply our framework to monetary policy implementation, showing that the transition from an abundant to a merely ample reserve regime can produce sharp movements in interbank rates.