Valuation in Over-the-Counter Markets

Multimarket trading and corporate bond liquidity

“…These findings are consistent with microstructure models that predict a positive relation between the number of potential investors and liquidity in over-the-counter markets (e.g. Duffie et al, 2005Duffie et al, , 2007. Furthermore, the liquidity advantage of global bonds is priced, and can explain the tendency of large corporations to issue global rather than domestic bonds.…”

“…Duffie et al (2005Duffie et al ( , 2007 develop a model in which transactions costs and liquidity in over-the-counter markets, such as the corporate bond market, depend on the number of potential investors. Their model predicts that illiquidity discounts are smaller if the number of qualified investors is greater, and investors have access to multiple dealers.…”

“…Since global bonds can be marketed to investors in both the US market and the Eurobond market, their pool of potential investors is larger. Duffie et al (2005Duffie et al ( , 2007 develop a model in which transactions costs and liquidity in over-the-counter markets, such as the corporate bond market, depend on the number of potential investors. Their model predicts that illiquidity discounts are smaller if investors have access to multiple market makers, and the number of qualified investors is larger.…”

Evaluating the impact of unconventional monetary policy measures: Empirical evidence from the ECB׳s Securities Markets Programme

“…Second, in terms of impact channels, we find that the relatively large effects from SMP purchases can be explained in terms of reduced liquidity risk premia, default risk signaling effects, and possibly local supply effects in segmented markets (see Duffie, Garleanu, andPedersen, 2005, 2007;and De Pooter, Martin, and Pruitt, 2013). Firstly, the flow of purchases from an investor of last resort reduces liquidity risk premia by making a counterparty easier to find.…”

Portfolio choice under transitory price impact

“…In addition to the above-cited references, important contributions include Amihud and Mendelson (1986), Lippman and McCall (1986), Grossman and Miller (1988), Grossman and Laroque (1990), Boudoukh and Whitelaw (1993), Holmstrom and Tirole (2001), Huang (2003), Kahl et al (2003), O'Hara (2003), Eisfeldt (2004), Duffie et al (2005Duffie et al ( , 2008, Cetin et al (2006), Acharya and Pederson (2005), Vayanos and Wang (2007), Brunnermeier andPederson (2009), Longstaff (2009), and many others.…”