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

Jean-Edouard Colliard, Thierry Foucault and Peter Hoffmann

Working Papers from HAL

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)
Date: 2018-07-10
References: Add references at CitEc
Citations: View citations in EconPapers (6)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Inventory management, dealers’ connections, and prices in OTC markets (2021)
Working Paper: Inventory Management, Dealers' Connections, and Prices in OTC Markets (2018)
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:hal:wpaper:hal-01933855

DOI: 10.2139/ssrn.3211285

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().