rates of return to compensate agents for their relative lack of liquidity. Consistent with empirical findings, our model …

liquid portfolios, but liquidity comes at a cost: inflation. The OTC market serves as a secondary asset market, in which … agents can rebalance their positions depending on their liquidity needs. Hence, a contribution of our paper is to provide a …

rates of return to compensate agents for their relative lack of liquidity. Consistent with empirical findings, our model …

do not find evidence that liquidity risk and the probability of informed trade influence CoC. Overall, our results …