We study specialized lending in a credit market competition model with private information. Two banks, equipped with similar data processing systems, possess "general" signals regarding the borrower's quality. However, the specialized bank gains an additional advantage through further...

We develop a model of a two-sided asset market in which trades are intermediated by dealers and are bilateral. Dealers compete to attract order flow by posting the terms at which they execute trades-- which can include prices, quantities, and execution speed--and investors direct their orders...

We use an extensive data set of bilateral exposures on credit default swap (CDS) to estimate the impact on collateral demand of new margin and clearing practices and regulations. We decompose collateral demand for both customers and dealers into several key components, including the "velocity...

We use minute-by-minute Bloomberg online status microdata during 2017-2021 to directly study how hard and soft information collection affects equity analyst performance. Collection of hard information, proxied by office workday length, is positively associated with the quantity and timeliness of...

We model financial innovations such as Exchange-Traded Funds, smart beta products, and many index-based vehicles as composite securities (CSs) that facilitate trading the common factors in assets' liquidation values. Through accessing a larger basket of assets in endogenously chosen proportions,...

Many observers have argued that credit default swaps contributed significantly to the credit crisis. Of particular concern to these observers are that credit default swaps trade in the largely unregulated over-the-counter market as bilateral contracts involving counterparty risk and that they...

In over-the-counter (OTC) markets, customers search for counterparties. Little is known about this process, however, because existing data is comprised of transaction records, which are only informative about the end of a successful search. Leveraging data from the leading trading platform for...

We model the opacity of over-the-counter (OTC) markets in a setup where agents share risks, but have incentives to default and their financial positions are not mutually observable. We show that this setup results in excess "leverage" in that parties take on short OTC positions that lead to...

We extend Duffie, Garleanu, and Pedersen's (2005) search-theoretic model of over-the-counter asset markets, allowing for a decentralized inter-dealer market with arbitrary heterogeneity in dealers' valuations or inventory costs. We develop a solution technique that makes the model fully...

Financial regulations and clientele segmentation explain the proliferation of order types on stock exchanges. Plain market and limit orders lose money, indicating that informed traders use complex orders. Fifty-seven percent of trading volume comes from non-routable orders, which are designed to...