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Discussion Paper Details

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Title: Cash Providers: Asset Dissemination over Intermediation Chains

Author(s): Jean-Edouard Colliard and Gabrielle Demange

Publication Date: August 2015

Keyword(s): dealer markets, intermediation chains, liquidity and OTC markets

Programme Area(s): Financial Economics

Abstract: Many financial assets are disseminated to final investors via chains of over-the-counter transactions between intermediaries (dealers). We model such an intermediation process as a game with successive take-it-or-leave-it offers: An agent buying some units of an asset can offer to sell part of the volume to another OTC partner, and so on. At the equilibrium of this game, the length of intermediation chains, the terms of trade (prices and units sold) and their pattern along a chain are endogenously determined. Our model thus gives a framework to analyze how intermediation chains impact an asset's market liquidity, its issuance, and who ultimately holds the asset.

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Bibliographic Reference

Colliard, J and Demange, G. 2015. 'Cash Providers: Asset Dissemination over Intermediation Chains'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10747