Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7362378 | Journal of Financial Markets | 2018 | 20 Pages |
Abstract
Using primary dealer transactional data from the government bond (gilt) market in the United Kingdom, we identify a new channel through which dealer funding constraints may impair liquidity in two-tiered OTC markets. The key finding is that funding constraints also inhibit dealers' ability to accommodate each others' trade requests in the inter-dealer segment, which limits their collective ability to manage inventories and share risk. As a result, funding constraints end up compromising liquidity above and beyond any direct effects caused by dealers' inability to accommodate client trade requests due to their individual balance sheet constraints.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Evangelos Benos, Filip Žikeš,