Darrell Duffie and
Research Papers from Stanford University, Graduate School of Business
Size discovery is the use of trade mechanisms by which large quantities of an asset can be exchanged at a price that does not respond to price pressure. Primary examples of size discovery include "workup" in Treasury markets, "matching sessions" in corporate bond and CDS markets, and block-trading "dark pools" in equity markets. By freezing the execution price and giving up on market-clearing, a size-discovery mechanism overcomes large investors' concerns over price impacts. Price-discovery mechanisms clear the market, but cause investors to internalize their price impacts, inducing costly delays in the reduction of position imbalances. We show how augmenting a price-discovery mechanism with a size-discovery mechanism improves allocative efficiency.
JEL-codes: D47 D82 G14 (search for similar items in EconPapers)
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Journal Article: Size Discovery (2017)
Working Paper: Size Discovery (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:3345
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