EconPapers    
Economics at your fingertips  
 

Inventory Management, Dealers' Connections, and Prices in OTC Markets

Jean-Edouard Colliard, Thierry Foucault and Peter Hoffmann

No 1286, HEC Research Papers Series from HEC Paris

Abstract: We propose a new model of interdealer trading. Dealers trade together to reduce their inventory holding costs. Core dealers share these costs efficiently and provide liquidity to peripheral dealers, who have heterogeneous access to core dealers. We derive predictions about the effects of peripheral dealers’ connectedness to core dealers and the allocation of aggregate inventories between core and peripheral dealers on the distribution of interdealer prices, the efficiency of interdealer trades, and trading costs for the dealers’ clients. For instance, the dispersion of interdealer prices is higher when fewer peripheral dealers are connected to core dealers or when their aggregate inventory is higher.

Keywords: OTC markets; Interdealer trading; Inventory management (search for similar items in EconPapers)
JEL-codes: G00 (search for similar items in EconPapers)
Pages: 86 pages
Date: 2018-07-10
New Economics Papers: this item is included in nep-fmk and nep-mst
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3211285 Full text (text/html)

Related works:
Working Paper: Inventory management, dealers’ connections, and prices in OTC markets (2021) Downloads
Working Paper: Inventory Management, Dealers' Connections, and Prices in OTC Markets (2018) Downloads
Working Paper: Inventory Management, Dealers' Connections, and Prices in OTC Markets (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1286

Access Statistics for this paper

More papers in HEC Research Papers Series from HEC Paris HEC Paris, 78351 Jouy-en-Josas cedex, France. Contact information at EDIRC.
Bibliographic data for series maintained by Antoine Haldemann ().

 
Page updated 2025-03-24
Handle: RePEc:ebg:heccah:1286