We augment a simple inventory model with new features of the post-crisis regulations to offer new predictions on the effects of post-crisis regulations on the over-the-counter markets. First, the increased capital requirements of Basel III lead to an overall increase in order rejection rates of...

We consider a model in which dealers intermediate trades between clients and provide immediacy, or, market liquidity. Dealers can exert unobservable effort to improve the chance of intermediating profitably. This moral-hazard friction impairs dealers' ability to raise external finance and hence...

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”....

We study the quoting activity of market makers in relation to trading, liquidity, and expected returns. Empirically, we find larger quote-to-trade (QT) ratios in small, illiquid or neglected firms, yet large QT ratios are associated with low expected returns. The last result is driven by quotes,...

We study information acquisition in dealer markets. We first identify a one-sided strategic complementarity in information acquisition: the more informed traders are, the larger market makers' gain from becoming informed. When quotes are observable, this effect in turn induces a strategic...

We identify the broker each corporate insider trades through, and show that analysts and mutual fund managers affiliated with such "inside brokers'" retain a substantial information advantage on the insider's firm, even after these trades are disclosed. Affiliated analysts issue more accurate...

Investors can execute trades through either brokers that trade on their behalf (agency intermediation) or dealers that trade with them (principal intermediation). We explain the heterogeneity in intermediation via the trade-off between monitoring brokers and incurring dealer inventory costs....

We analyze the contribution to price discovery of market and limit orders by high frequency traders (HFTs) and non-HFTs. While market orders have a larger individual price impact, limit orders are far more numerous. This results in price discovery occurring predominantly through limit orders....

We study optimal trading strategy of a market maker with stock inventory in the presence of short-term market changes, especially changes in trading intensity of market participants and stock volatility. We employ Poisson jump processes in modelling such market condition changes. We provide...