Glode, Vincent, Opp, Christian C. and Sverchkov, Ruslan (2021) To pool or not to pool? security design in OTC markets. Journal of Financial Economics . doi:10.1016/j.jfineco.2021.09.021 (In Press)

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Abstract

We study security issuers’ decisions on whether to pool assets when facing counterparties endowed with market power, as is common in over-the-counter markets. Our analysis reveals how buyers’ market power may render the pooling of assets suboptimal — both privately and socially — in particular, when the potential gains from trade are large. Pooling assets then reduces the elasticity of trade volume in the relevant part of the payoff distribution, exacerbating the inefficient rationing associated with the exercise of buyers’ market power. Our analysis provides insight on the determinants of asset-backed securities issuance, including regulatory reforms affecting financial institutions’ liquidity.

Item Type:	Journal Article
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HG Finance
Divisions:	Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH):	Over-the-counter markets , Securities , Syndicates (Finance) , Assets (Accounting) -- Management
Journal or Publication Title:	Journal of Financial Economics
Publisher:	Elsevier
ISSN:	0304-405X
Official Date:	1 October 2021
Dates:	Date Event 1 October 2021 Available 21 July 2021 Accepted
DOI:	10.1016/j.jfineco.2021.09.021
Status:	Peer Reviewed
Publication Status:	In Press
Access rights to Published version:	Restricted or Subscription Access

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