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; Trading Volume; Bond Interest Rates
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.:
- Pierre-Olivier Weill & Guillaume Rocheteau & Ricardo Lagos, 2010.
"Crises and Liquidity in Over-the-counter Markets,"
2010 Meeting Papers
500, Society for Economic Dynamics.
- Pierre-Olivier Weill & Dimitri Vayanos, 2007.
"A Search-Based Theory of the On-the-Run Phenomenon,"
FMG Discussion Papers
dp577, Financial Markets Group.
- 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.
- 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, 2005. "A search-based theory of the on-the-run phenomenon," LSE Research Online Documents on Economics 459, London School of Economics and Political Science, LSE Library.
- Pierre-Olivier Weill & Dimitri Vayanos, 2005. "A Search-Based Theory of the On-the-Run Phenomenon," 2005 Meeting Papers 701, Society for Economic Dynamics.
- Dimitri Vayanos & Pierre-Olivier Weill, 2007. "A search-based theory of the on-the-run phenomenon," LSE Research Online Documents on Economics 24474, London School of Economics and Political Science, LSE Library.
- 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.
- 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.
- Peter Kondor & Ana Babus, 2013. "Trading and Information Diffusion in Over-the-Counter Markets," 2013 Meeting Papers 792, 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.
- 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.
- Darrell Duffie & Semyon Malamud & Gustavo Manso, 2009.
"Information Percolation With Equilibrium Search Dynamics,"
Econometric Society, vol. 77(5), pages 1513-1574, 09.
- Darrell DUFFIE & Semyon MALAMUD & Gustavo MANSO, . "Information Percolation with Equilibrium Search Dynamics," Swiss Finance Institute Research Paper Series 09-02, Swiss Finance Institute.
- Antoaneta Sergueiva, 2013. "Systemic Risk Identification, Modelling, Analysis, and Monitoring: An Integrated Approach," Papers 1310.6486, arXiv.org.
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.