AbstractWe develop a model of decentralized markets in which trading environment is determined by a general network structure. We study how the equilibrium allocation and liquidity depend on the network topology and how an agent’s risk exposure depends on other agents’ exposures. Agents hold several, position specific “local market portfolios,” that also determine the “local market clearing prices”. The impact of one trader on another decays exponentially in the distance in the network, at an explicitly given equilibrium rate. Decentralized trading may increase welfare. Liquidity may be higher for “less connected” networks.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 12-18.
Length: 48 pages
Date of creation: Sep 2012
Date of revision:
Contact details of provider:
Web page: http://www.NETinst.org/
Asset pricing; Decentralized Market; Trading Network; Over-the-counter; Welfare;
Find related papers by JEL classification:
- D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dimitri Vayanos & Pierre-Olivier Weill, 2006.
"A Search-Based Theory of the On-the-Run Phenomenon,"
NBER Working Papers
12670, National Bureau of Economic Research, Inc.
- Dimitri Vayanos & Pierre-Olivier Weill, 2008. "A Search-Based Theory of the On-the-Run Phenomenon," Journal of Finance, American Finance Association, vol. 63(3), pages 1361-1398, 06.
- Vayanos, Dimitri & Weill, Pierre-Olivier, 2006. "A Search-Based Theory of the On-the-Run Phenomenon," CEPR Discussion Papers 5965, C.E.P.R. Discussion Papers.
- Pierre-Olivier Weill & Dimitri Vayanos, 2007. "A Search-Based Theory of the On-the-Run Phenomenon," FMG Discussion Papers dp577, Financial Markets Group.
- Pierre-Olivier Weill & Dimitri Vayanos, 2005. "A Search-Based Theory of the On-the-Run Phenomenon," 2005 Meeting Papers 701, Society for Economic Dynamics.
- Weill, Pierre-Olivier, 2008.
"Liquidity premia in dynamic bargaining markets,"
Journal of Economic Theory,
Elsevier, vol. 140(1), pages 66-96, May.
- Pierre-Olivier Weill, 2004. "Liquidity Premia in Dynamic Bargaining Markets," Econometric Society 2004 North American Winter Meetings 648, Econometric Society.
- Darrell DUFFIE & Semyon MALAMUD & Gustavo MANSO, 2010.
"Information Percolation in Segmented Markets,"
Swiss Finance Institute Research Paper Series
10-09, Swiss Finance Institute.
- Peter Kondor & Ana Babus, 2013.
"Trading and Information Diffusion in Over-the-Counter Markets,"
2013 Meeting Papers
792, Society for Economic Dynamics.
- Ana Babus & Péter Kondor, 2012. "Trading and Information Diffusion in Over-the-Counter Markets," CEU Working Papers 2012_19, Department of Economics, Central European University, revised 09 Dec 2012.
- Pierre-Olivier Weill & Guillaume Rocheteau & Ricardo Lagos, 2010.
"Crises and Liquidity in Over-the-counter Markets,"
2010 Meeting Papers
500, Society for Economic Dynamics.
- Max Blouin & Roberto Serrano, 1998.
"A Decentralized Market with Common Values Uncertainty: Non-Steady States,"
98-5, Brown University, Department of Economics, revised 10 Aug 1998.
- Blouin, Max R & Serrano, Roberto, 2001. "A Decentralized Market with Common Values Uncertainty: Non-Steady States," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 323-46, April.
- Darrell DUFFIE & Semyon MALAMUD & Gustavo MANSO, .
"Information Percolation with Equilibrium Search Dynamics,"
Swiss Finance Institute Research Paper Series
09-02, Swiss Finance Institute.
- Darrell Duffie & Semyon Malamud & Gustavo Manso, 2009. "Information Percolation With Equilibrium Search Dynamics," Econometrica, Econometric Society, vol. 77(5), pages 1513-1574, 09.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nicholas Economides).
If references are entirely missing, you can add them using this form.