Two frictions, arrival asynchronicity and information asymmetry, stand in the way of the efficient asset reallocation from a low-valuation seller to high-valuation buyers. Middlemen help alleviate these frictions 1) by helping connect the investors and 2) by generating market activity from which...

A breakdown of cross-market arbitrage activity makes markets more fragile, and could result in price crashes. We provide supportive evidence for this novel channel based on a high-frequency analysis of the most salient crash in recent history: The Flash Crash. We further show that such event can...

Speed is a salient feature of modern financial markets. This paper studies investors' speed acquisition, alongside their information acquisition. Speed heterogeneity arises in equilibrium, fragmenting the information aggregation process temporally and affecting price informativeness...

This paper studies simultaneous multilateral search (SMS) in over-the-counter (OTC) markets: when searching, an investor contacts several potential counterparties and then trades with the one offering the best quote. Search intensity (how frequently one can search) and search capacity (how many...

This paper argues that market makers' presence is uncertain over any short time interval, as their operations are subject to constraints of, e.g., capital, technology, and attention. Such uncertain market making implies a random pricing equilibrium with new implications on market quality. A...

This paper develops a structural model to examine high-frequency price dynamics. The key innovation is to allow trades' permanent price impact to be time-varying—dynamic trade informativeness. A distribution-free filtering technique pins the real-world data to the model. The filtered series...

We study how derivatives (with nonlinear payoffs) affect the liquidity of the underlying asset. In a rational expectations equilibrium, informed investors expect low conditional volatility and sell derivatives to the others. These derivative trades affect investors’ utility differently,...