Paper: “OTC Intermediaries” (with Bernard Herskovic, Sriram Rajan, and Emil Siriwardane) Abstract: We estimate the systemic effects of exit by a key over-the-counter (OTC) intermediary. In our model, risk-averse traders are connected by a core-periphery network. If traders are also averse to concentrated bilateral exposures then the incomplete network prevents full risk sharing. We quantify […]
Author: Zach Bethune
Paper Title: “Frictional Capital Markets: A New Frontier” joint with Wei Cui and Yu Zhu Keep up to date with announcements by subscribing to our mailing list.
Paper Title: Augmenting Markets with Mechanisms Abstract: We explain how the common practice of size-discovery trade detracts from overall financial market efficiency. At each of a series of size-discovery sessions, traders report their desired trades, generating allocations of the asset and cash that rely on the most recent exchange price. Traders can thus mitigate exchange […]
Paper: “Volume and Intermediation in Corporate Bond Markets” joint with Artem Neklyudov and Chester Spatt Slides and Zoom Registration Abstract: Size-reporting of trades in corporate bonds is capped when the trade volume is above $1 million for high-yield bonds and above $5 million for investment grade bonds. We use a regulatory sample of trades, masked […]
Paper: “Gradual Bargaining in Decentralized Asset Markets” Abstract: We introduce a new approach to bargaining, with strategic and axiomatic foundations, into models of decentralized asset markets. According to this approach, which encompasses the Nash (1950) solution as a special case, bilateral negotiations follow an agenda that partitions assets into bundles to be sold sequentially. We […]