|
Archive@NYU >
Stern School of Business >
Salomon Center >
Macro Finance >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27300
|
| Title: | Valuation in Over-the-Counter Markets |
| Authors: | Duffie, Darrell
Gârleanu, Nicolae
Pedersen, Lasse Heje |
| Issue Date: | 30-Mar-2004 |
| Series/Report no.: | S-MF-04-04 |
| Abstract: | We provide the impact on asset prices of search-and-bargaining frictions
in over-the-counter markets. Under natural conditions, prices are lower
and illiquidity discounts higher when counterparties are harder to find,
when sellers have less bargaining power, when the fraction of qualified
owners is smaller, or when risk aversion, volatility, or hedging demand
are larger. If agents face risk limits, then higher volatility leads to
greater difficulty locating unconstrained buyers, resulting in lower
prices. Information can fail to be revealed through trading when search
is difficult. We discuss a variety of financial applications and
testable implications. |
| URI: | http://hdl.handle.net/2451/27300 |
| Appears in Collections: | Macro Finance
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
