Money and Bond Markets


Paper: Asset Dissemination Through Dealer Markets.

By Jean-Edouard Colliard and Gabrielle Demange, forthcoming at Management Science. Money markets and fixed income markets are typically over-the-counter. Recent empirical research has documented the complexity of intermediation patterns on these markets, in particular the possibility that a large initial quantity is gradually distributed to new investors after a series of interdealer transactions. This paper proposes a model of this dissemination process, and rationalizes some of intermediation structures observed in different markets. The model applies in particular to repo markets and generates an endogenous level of rehypothecation. Check it out!


Conference: ECB Annual conference on money markets.

The annual conference on money markets organized by the ECB took place on 23 and 24 November. Check out the program and the recording of the presentations here. Jean-Edouard Colliard discussed the paper “Monetary Policy Transmission in Segmented Markets” by Jens Eisenschmidt (European Central Bank), Yiming Ma (Columbia Business School), and Anthony Lee Zhang (University of Chicago Booth School of Business). The paper shows that dealers have significant market power in the over-the-counter segment of the European repo market, and that this considerably attenuates the pass-through of monetary policy changes to short-term repo rates. This paper and others on the conference program illustrate the relevance of combining expertise on market microstructure with monetary policy topics.