The Economics of Over-the-Counter Markets
A Toolkit for the Analysis of Decentralized Exchange
- English
- ePUB (mobile friendly)
- Available on iOS & Android
The Economics of Over-the-Counter Markets
A Toolkit for the Analysis of Decentralized Exchange
About this book
An essential primer on an important yet understudied type of financial market
Many of the largest financial markets in the world do not organize trade through an exchange but rather operate within a decentralized or over-the-counter (OTC) structure. Understanding how these markets work has become increasingly important in recent years, as illiquidity in certain OTC markets has appeared as the first signs of trouble—if not the cause itself—of the past two financial crises. However, standard models of financial markets are not suitable for studying the causes of illiquidity in OTC markets, nor the optimal policy response. The Economics of Over-the-Counter Markets proposes a unified search-theoretic framework designed to explicitly capture the key features of OTC markets, confront the growing set of stylized facts from these markets, and provide guidance for policies designed to promote liquidity and resiliency. This incisive book covers empirical regularities that are common across OTC markets, develops the methodological tools to analyze the benchmark theoretical models in the academic literature, and extends these models to confront the latest issues facing these markets.
- Covers a broad range of topics, including asset pricing, liquidity, transaction costs, asymmetric information, financial crises, and market design
- An ideal textbook for graduate students in economics and finance
- An invaluable resource for policymakers seeking a framework to assess the impact of new developments in fixed-income and short-term funding markets
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Information
Table of contents
- Cover Page
- Title Page
- Copyright Page
- Dedication
- Contents
- List of Figures
- List of Tables
- Acknowledgments
- List of Abbreviations
- List of Notations
- 1. Introduction
- 2. OTC Markets Facts
- 3. Sequential Search for Assets
- 4. Semicentralized Markets
- 5. Pure Decentralized Markets
- 6. Divisible Asset Holdings
- 7. Frictional Intermediation
- 8. Price Setting Mechanisms
- 9. OTC Markets under Stress
- 10. Asymmetric Information: Private Values
- 11. Asymmetric Information: Common Values
- 12. OTC vs. Centralized Markets
- 13. Conclusion
- A. Mathematical Tools
- Bibliography
- Index