We propose a new approach to modeling informed order flows. Our approach generalizes arbitrage pricing to incorporate both information and demand effects, giving rise to a new quadratic factor model of price impacts. Our approach offers two fresh insights into the economics of informed trading....

The two roles of a dealer in over-the-counter markets, immediacy provision and matchmaking, create a conflict of interest--the dealer prioritizes inventory turnover for immediacy provision, rather than making matches between customer flows. Compared to a counterfactual scenario without this...

How does the predictability of future noisy flows impact asset prices? We answer this question by developing a dynamic multi-asset price impact model. The model setup is general---both flows and fundamental returns can be correlated for the cross-section of assets, and flows can exhibit a...