Cover

pdf iconDownload PDF
 

Title Page, Copyright

pdf iconDownload PDF
 

Contents

pdf iconDownload PDF

pp. vii-viii

List of Tables

pdf iconDownload PDF

pp. ix-x

List of Figures

pdf iconDownload PDF

pp. xi-xii

read more

Preface

pdf iconDownload PDF

pp. xiii-xvi

This research monograph addresses the behavior of over-the-counter (OTC ) markets. Rather than trading through a centralized mechanism such as an auction, specialist, or broadly accessible limit-order book, participants in an OTC market negotiate terms privately with other market participants, often pairwise. ...

read more

1 Over-the-Counter Markets

pdf iconDownload PDF

pp. 1-12

An over-the-counter (OTC ) market does not use a centralized trading mechanism, such as an auction, specialist, or limit-order book, to aggregate bids and offers and to allocate trades. Instead, buyers and sellers negotiate terms privately, often in ignorance of the prices currently available from other potential counterparties and with limited knowledge of trades recently negotiated elsewhere in the market. ...

read more

2 The Case of Federal Funds Lending

pdf iconDownload PDF

pp. 13-26

This chapter1 shows how the intraday allocation and pricing of overnight loans of federal funds reflect the OTC interbank market in which these loans are traded. A would-be borrower or lender typically finds a counterparty institution by direct bilateral contact. ...

read more

3 Search for Counterparties

pdf iconDownload PDF

pp. 27-41

This chapter introduces the modeling of search and random matching in large economies. The objective is to build intuition and techniques for later chapters. After some mathematical prerequisites, the notion of random matching is defined. The law of large numbers is then invoked to calculate the cross-sectional distribution of types of matches. ...

read more

4 A Simple OTC Pricing Model

pdf iconDownload PDF

pp. 42-62

This chapter, based entirely on Duffie, Gârleanu, and Pedersen (2005, 2007),1 presents a simple introduction to asset pricing in OTC markets. Investors search for opportunities to trade and bargain with counterparties, each counterparty being aware that failure to conduct a trade could lead to a costly new search for a counterparty. ...

read more

5 Information Percolation in OTC Markets

pdf iconDownload PDF

pp. 63-78

This chapter describes a simple model of the “percolation” of information of common interest through an OTC market with many agents. Agents encounter each other at random over time and reveal information to each other through bids and offers. ...

Appendix A: Foundations for Random Matching

pdf iconDownload PDF

pp. 79-83

Appendix B: Counting Processes

pdf iconDownload PDF

pp. 84-86

Bibliography

pdf iconDownload PDF

pp. 87-92

Index

pdf iconDownload PDF

pp. 93-95