Working Paper: CEPR ID: DP14847
Authors: Pierre-Olivier Weill
Abstract: I review the recent literature that applies search-and-matching theory to the study of Over-the-Counter (OTC) financial markets. I formulate and solve a simple model in order to illustrate the typical assumptions and economic forces at play in existing work. I then offer thematic tours of the literature and, in the process, discuss avenues for future research.
Keywords: search; frictions; otc markets; asset pricing
JEL Codes: G11; G12; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| search frictions (F12) | asset pricing (G19) |
| search frictions (F12) | transaction costs (D23) |
| search frictions (F12) | trading volume (G15) |
| search intensity (D83) | reservation value of customers (J17) |
| bargaining power of dealers (L14) | reservation value of customers (J17) |
| search frictions (F12) | price convergence to autarky value (F00) |
| search frictions (F12) | price alignment with interdealer price (L11) |