Publication Type
Journal Article
Version
publishedVersion
Publication Date
5-2017
Abstract
This paper investigates how dealers’ trading relations shape their trading behavior in the corporate bond market. Dealers charge lower spreads to dealers with whom they have the strongest ties and more so during periods of market turmoil. Systemically important dealers exploit their connections at the expense of peripheral dealers as well as clients, charging higher markups than to other core dealers. Also, intermediation chains lengthened by 20% following the collapse of a flagship dealer in 2008 and even more for institutions strongly connected to this dealer. Finally, dealers drastically reduced their inventory during the crisis.
Keywords
corporate bond, dealer network, intermediation chain, over-the-counter financial market, trading relationship
Discipline
Finance | Finance and Financial Management
Research Areas
Finance
Areas of Excellence
Growth in Asia
Publication
Journal of Financial Economics
Volume
124
Issue
2
First Page
266
Last Page
284
ISSN
0304-405X
Identifier
10.1016/j.jfineco.2017.01.003
Publisher
Elsevier
Citation
DI MAGGIO, Marco; KERMANI, Amir; and SONG, Zhaogang.
The value of trading relations in turbulent times. (2017). Journal of Financial Economics. 124, (2), 266-284.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7931
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
External URL
https://api.elsevier.com/content/abstract/scopus_id/85010205096
Additional URL
https://doi.org/10.1016/j.jfineco.2017.01.003