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Terry Hendershott, UC Berkeley Print
Thursday, 27 April 2017, 16:30 - 18:00

Joint with NBB, KULeuven, UA, UCL, UGent, ULB, ULg, UMons, UNamur, USaint-Louis, Vlerick and VUB

Terry Hendershott, Haas School of Business, University of California Berkeley

Relationship Trading in OTC Markets

Abstract:  We examine the network of bilateral trading relations between insurers and dealers in the over-the-counter corporate bond market. Using comprehensive regulatory data we find that many insurers use only one dealer while the largest insurers have a network of up to eighty dealers. To understand the heterogeneity in network size we build a model of decentralized trade in which insurers trade off the benefits of repeat business against more intense dealer competition. Empirically, large insurers form more relations and receive better prices than small insurers. The model matches both the distribution of insurers' network sizes and how prices depend on insurers' size and the size of their dealer network.

Location: Auditorium of the National Bank of Belgium (Room A1), Entrance: Warmoesberg 61, Brussels
Contact: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
Please reply by email before Wednesday April 26th to nbbfinancial.seminar@nbb.be if you wish to participate to this seminar or if you want to have an appointment with the speaker.

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