Cash Providers: Asset Dissemination over Intermediation Chains

CEPR Discussion Paper No. DP10747

65 Pages Posted: 18 Mar 2014 Last revised: 16 Apr 2017

See all articles by Jean-Edouard Colliard

Jean-Edouard Colliard

HEC Paris - Finance Department

Gabrielle Demange

Paris School of Economics (PSE); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Multiple version iconThere are 2 versions of this paper

Date Written: April 12, 2017

Abstract

Many financial assets are disseminated to final investors via chains of over-the-counter transactions between intermediaries (dealers). We model such an intermediation process as a game with successive take-it-or-leave-it offers: An agent buying some units of an asset can offer to sell part of the volume to another OTC partner, and so on. At the equilibrium of this game, the length of intermediation chains, the terms of trade (prices and units sold) and their pattern along a chain are endogenously determined. Our model thus gives a framework to analyze how intermediation chains impact an asset's market liquidity, its issuance, and who ultimately holds the asset.

Keywords: intermediation chains, liquidity, OTC markets, dealer markets

JEL Classification: C78, D85, G21, G23

Suggested Citation

Colliard, Jean-Edouard and Demange, Gabrielle, Cash Providers: Asset Dissemination over Intermediation Chains (April 12, 2017). CEPR Discussion Paper No. DP10747. Available at SSRN: https://ssrn.com/abstract=2410174 or http://dx.doi.org/10.2139/ssrn.2410174

Jean-Edouard Colliard (Contact Author)

HEC Paris - Finance Department ( email )

France

Gabrielle Demange

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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