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Sequential Search for Corporate Bonds

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Abstract

Customers in over-the-counter (OTC) markets must find a counterparty to trade. Little is known about this process, however, because existing data consist of transaction records, which only reveal the outcome of a search. Using data from a trading platform for corporate bonds, we unpack the search process. We analyze how long it takes customers to trade and how dealers’ offers evolve across repeated inquiries. We estimate that it takes 2-3 days to complete a transaction after an unsuccessful attempt, with substantial variation across trade and customer characteristics. Our analysis offers insights into the sources of trading delays in OTC markets.

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  • Mahyar Kargar & Benjamin Lester & Sébastien Plante & Pierre-Olivier Weill, 2025. "Sequential Search for Corporate Bonds," Working Papers 25-08, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:99648
    DOI: 10.21799/frbp.wp.2025.08
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    Cited by:

    1. Jan-Peter Siedlarek & Vladimir Yankov, 2025. "The Secondary Market for Syndicated Loans," Working Papers 25-10, Federal Reserve Bank of Cleveland.
    2. Stefan J. Huber & Chongho Kim & Edward M. Watts, 2024. "Earnings News and Over‐the‐Counter Markets," Journal of Accounting Research, Wiley Blackwell, vol. 62(2), pages 701-735, May.
    3. Assa Cohen & Mahyar Kargar & Benjamin Lester & Pierre-Olivier Weill, 2024. "Inventory, Market Making, and Liquidity in OTC Markets," Working Papers 24-22, Federal Reserve Bank of Philadelphia.

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    More about this item

    Keywords

    Over-the-counter markets; intermediation; corporate bonds; time-to-trade;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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