Dark Markets : Asset Pricing and Information Transmission in Over-the-Counter Markets.
Title:
Dark Markets : Asset Pricing and Information Transmission in Over-the-Counter Markets.
Author:
Duffie, Darrell.
ISBN:
9781400840519
Personal Author:
Physical Description:
1 online resource (92 pages)
Series:
Princeton Lectures in Finance
Contents:
Cover -- DARK MARKETS -- Title -- Copyright -- Dedication -- Contents -- List of Tables -- List of Figures -- Preface -- 1 Over-the-Counter Markets -- 1.1 Bilateral Negotiation of Terms -- 1.2 OTC Transparency -- 1.3 Why Trade Over the Counter? -- 1.4 Managing OTC Credit Risk -- 1.5 Price Behavior with Search Frictions -- 2 The Case of Federal Funds Lending -- 2.1 The Federal Funds Market -- 2.2 Data -- 2.3 Analysis of Transaction-Pairing Likelihood -- 2.4 Determinants of the Rate -- 3 Search for Counterparties -- 3.1 Preliminaries -- 3.2 Random Matching -- 3.3 Dynamic Search Models -- 3.4 Markov Chain for Type -- 3.5 Continuous-Time Search and Matching -- 3.6 Optimal Search -- 3.7 Equilibrium Search Intensities -- 3.8 Development of the Search Literature -- 4 A Simple OTC Pricing Model -- 4.1 Basic Risk-Neutral OTC Pricing Model -- 4.2 Bargaining over the Price -- 4.3 Risk Aversion -- 4.4 Numerical Example -- 4.5 Price Response to Supply Shocks -- 4.6 Numerical Examples -- 5 Information Percolation in OTC Markets -- 5.1 The Basic Model -- 5.2 Population Information Dynamics -- 5.3 Market Settings -- 5.3.1 Information Sharing at Wallet Games -- 5.3.2 Double Auctions -- 5.4 Numerical Example -- 5.5 New Private Information -- 5.6 Multiagent Information Exchanges -- 5.7 Valid Initial Type Distributions -- 5.8 Convergence and Further Extensions -- A Foundations for Random Matching -- A.1 Mathematical Preliminaries -- A.2 Random Matching Results -- B Counting Processes -- Bibliography -- Index.
Abstract:
Over-the-counter (OTC) markets for derivatives, collateralized debt obligations, and repurchase agreements played a significant role in the global financial crisis. Rather than being traded through a centralized institution such as a stock exchange, OTC trades are negotiated privately between market participants who may be unaware of prices that are currently available elsewhere in the market. In these relatively opaque markets, investors can be in the dark about the most attractive available terms and who might be offering them. This opaqueness exacerbated the financial crisis, as regulators and market participants were unable to quickly assess the risks and pricing of these instruments. Dark Markets offers a concise introduction to OTC markets by explaining key conceptual issues and modeling techniques, and by providing readers with a foundation for more advanced subjects in this field. Darrell Duffie covers the basic methods for modeling search and random matching in economies with many agents. He gives an overview of asset pricing in OTC markets with symmetric and asymmetric information, showing how information percolates through these markets as investors encounter each other over time. This book also features appendixes containing methodologies supporting the more theory-oriented of the chapters, making this the most self-contained introduction to OTC markets available.
Local Note:
Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2017. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.
Genre:
Electronic Access:
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