Benchmarks in Search Markets

@article{Duffie2014BenchmarksIS,
  title={Benchmarks in Search Markets},
  author={Darrell Duffie and Piotr Dworczak and Haoxiang Zhu},
  journal={NBER Working Paper Series},
  year={2014}
}
We characterize the price-transparency role of benchmarks in over-the-counter markets. A benchmark can, under conditions, raise social surplus by increasing the volume of beneficial trade, facilitating more efficient matching between dealers and customers, and reducing search costs. Although the market transparency promoted by benchmarks reduces dealers' profit margins, dealers may nonetheless introduce a benchmark to encourage greater market participation by investors. Low-cost dealers may… 
Trading Strategies and Information Flow Around Price Benchmarks
This paper characterize equilibrium pricing and trading strategies in a competitive market where a subset of liquidity traders have a preference for executing their trades at a benchmark price. In
Over-the-Counter Markets for Non-Standardized Assets
Over-the-counter trades often involve non-standardized assets, such as municipal/corporate bonds, derivatives, real estate, and structured products. I study a dynamic equilibrium model of
Signaling in OTC Markets: Benefits and Costs of Transparency
We provide a theoretical rationale for dealer objections to ex post transparency in over-the-counter markets. Disclosure of the terms of a transaction conveys information possessed by the dealer
Signaling in OTC Markets: Benefits and Costs of Transparency
Dealers who acquire inventory in one transaction usually seek to dispose of it in a second transaction. If the terms of the first transaction are disclosed, then dealers will engage in costly
Robust Benchmark Design
Recent scandals over the manipulation of LIBOR, foreign exchange benchmarks, and other financial benchmarks have spurred policy discussions over their appropriate design. We characterize the optimal
Bargaining over a Non-Standardized Asset
In many over-the-counter asset markets, prices are negotiated bilaterally and bargaining over prices takes time. We show that bargaining delays arise when investors have precise private information
Over-the-Counter Markets with Bargaining Delays: The Role of Public Information in Market Liquidity
In many over-the-counter asset markets, prices are negotiated bilaterally and bargaining over prices takes time. We show that bargaining delays arise when investors have precise private information
The Effects of Regulating Benchmarks
In financial markets, dealers may take advantage of information asymmetries and extract a rent from buy-side traders. We show that an increase in the precision of a benchmark reduces noise in market
Centralizing Over-the-Counter Markets?
In traditional over-the-counter (OTC) markets investors trade bilaterally through intermediaries, called dealers. An important regulatory question is whether to centralize OTC markets by shifting
...
1
2
3
4
5
...

References

SHOWING 1-10 OF 60 REFERENCES
Robust Benchmark Design
Recent scandals over the manipulation of LIBOR, foreign exchange benchmarks, and other financial benchmarks have spurred policy discussions over their appropriate design. We characterize the optimal
Search with Learning from Prices: Does Increased Inflationary Uncertainty Lead to Higher Markups?
Aggregate cost uncertainty, arising from real shocks or unanticipated inflation, reduces the informativeness of prices by scrambling relative and aggregate variations. But when agents can acquire
Consumer search markets with costly revisits
This paper characterizes equilibrium outcomes in consumer search markets taking the cost of going back to stores already searched explicitly into account. We show that the optimal sequential search
Oligopolistic markets with sequential search and production cost uncertainty
This article analyzes a sequential search model where firms face identical but stochastic production costs, the realizations of which are unknown to consumers. We characterize a perfect Bayesian
Transparency and Liquidity: A Controlled Experiment on Corporate Bonds
This paper reports the results of a unique experiment designed to assess the impact of last-sale trade reporting on the liquidity of BBB corporate bonds. We find that increased transparency has
Corporate Bond Market Transaction Costs and Transparency
Using a complete record of U.S. over-the-counter (OTC) secondary trades in corporate bonds, we estimate average transaction costs as a function of trade size for each bond that traded more than nine
Strategic Pricing , Consumer Search and the Number of Firms
We examine an oligopoly model where some consumers engage in costly non-sequential search to discover prices. There are three distinct price-dispersed equilibria characterized by low, moderate and
Finding a Good Price in Opaque Over-the-Counter Markets
This article offers a dynamic model of opaque over-the-counter markets. A seller searches for an attractive price by visiting multiple buyers, one at a time. The buyers do not observe contacts,
Strategic Pricing, Consumer Search and the Number of Firms
We examine an oligopoly model where some consumers engage in costly non-sequential search to discover prices. There are three distinct price-dispersed equilibria characterized by low, moderate and
...
1
2
3
4
5
...