To Pool or Not to Pool? Security Design in OTC Markets /
Glode, Vincent.
To Pool or Not to Pool? Security Design in OTC Markets / Vincent Glode, Christian C. Opp, Ruslan Sverchkov. - Cambridge, Mass. National Bureau of Economic Research 2020. - 1 online resource: illustrations (black and white); - NBER working paper series no. w27361 . - Working Paper Series (National Bureau of Economic Research) no. w27361. .
June 2020.
We study security issuers' decision whether to pool assets when facing counterparties endowed with market power, as is common in over-the-counter markets. Unlike in competitive markets, pooling assets may be suboptimal in the presence of market power - both privately and socially - in particular, when the potential gains from trade are large. In these cases, pooling assets reduces the elasticity of trade volume in the relevant part of the payoff distribution, exacerbating inefficient rationing associated with the exercise of market power. Our results shed light on recently observed time-variation in the prevalence of pooling in financial markets.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.
To Pool or Not to Pool? Security Design in OTC Markets / Vincent Glode, Christian C. Opp, Ruslan Sverchkov. - Cambridge, Mass. National Bureau of Economic Research 2020. - 1 online resource: illustrations (black and white); - NBER working paper series no. w27361 . - Working Paper Series (National Bureau of Economic Research) no. w27361. .
June 2020.
We study security issuers' decision whether to pool assets when facing counterparties endowed with market power, as is common in over-the-counter markets. Unlike in competitive markets, pooling assets may be suboptimal in the presence of market power - both privately and socially - in particular, when the potential gains from trade are large. In these cases, pooling assets reduces the elasticity of trade volume in the relevant part of the payoff distribution, exacerbating inefficient rationing associated with the exercise of market power. Our results shed light on recently observed time-variation in the prevalence of pooling in financial markets.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.