Valuation in Over-the-Counter Markets

46 Pages Posted: 11 Nov 2008

See all articles by Darrell Duffie

Darrell Duffie

Stanford University

Nicolae Garleanu

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Lasse Heje Pedersen

AQR Capital Management, LLC; Copenhagen Business School - Department of Finance; New York University (NYU); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: September 2003

Abstract

We provide the impact on asset prices of trade by search and bargaining. Under natural conditions, prices are higher if investors can find each other more easily, if sellers have more bargaining power, or if the fraction of qualified owners is greater. 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.

Suggested Citation

Duffie, Darrell and Garleanu, Nicolae Bogdan and Pedersen, Lasse Heje, Valuation in Over-the-Counter Markets (September 2003). NYU Working Paper No. FIN-03-041. Available at SSRN: https://ssrn.com/abstract=1299488

Darrell Duffie (Contact Author)

Stanford University

Stanford, CA 94305
United States

Nicolae Bogdan Garleanu

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

HOME PAGE: http://faculty.haas.berkeley.edu/garleanu

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Lasse Heje Pedersen

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Copenhagen Business School - Department of Finance ( email )

Solbjerg Plads 3
Frederiksberg, DK-2000
Denmark

New York University (NYU) ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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