Asset Dissemination Through Dealer Markets

Management Science, Forthcoming

HEC Paris Research Paper No. FIN-2018-1296

53 Pages Posted: 5 Sep 2018 Last revised: 21 Sep 2020

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: September 17, 2020

Abstract

In over-the-counter markets for assets such as bonds or securitizations, large volumes can be split into smaller pieces and gradually sold to several final investors with the intermediation of multiple dealers. This paper proposes a model to study this process, called “asset dissemination”. A dealer buys several units of an asset from a customer, then sells some units to his customers and to a second dealer, who sells to his customers and a third dealer, and so on. The extent of dissemination is measured by the number of dealers involved and the total customer demand served. We show that asymmetric information on customer demand hinders both dimensions of dissemination. We also study how the quantity to disseminate and the dealers’ funding costs impact dissemination and the prices and quantities in interdealer transactions.

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

JEL Classification: C78, D85, G21, G23

Suggested Citation

Colliard, Jean-Edouard and Demange, Gabrielle, Asset Dissemination Through Dealer Markets (September 17, 2020). Management Science, Forthcoming, HEC Paris Research Paper No. FIN-2018-1296, Available at SSRN: https://ssrn.com/abstract=3244321 or http://dx.doi.org/10.2139/ssrn.3244321

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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