Economics at your fingertips  

The value of trading relations in turbulent times

Marco Di Maggio, Amir Kermani and Zhaogang Song

Journal of Financial Economics, 2017, vol. 124, issue 2, 266-284

Abstract: This paper investigates how dealers’ trading relations shape their trading behavior in the corporate bond market. Dealers charge lower spreads to dealers with whom they have the strongest ties and more so during periods of market turmoil. Systemically important dealers exploit their connections at the expense of peripheral dealers as well as clients, charging higher markups than to other core dealers. Also, intermediation chains lengthened by 20% following the collapse of a flagship dealer in 2008 and even more for institutions strongly connected to this dealer. Finally, dealers drastically reduced their inventory during the crisis.

Keywords: Corporate bond; Dealer network; Intermediation chain; Over-the-counter financial market; Trading relationship (search for similar items in EconPapers)
JEL-codes: G12 G14 G24 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
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:

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-04-16
Handle: RePEc:eee:jfinec:v:124:y:2017:i:2:p:266-284