We study an over-the-counter (OTC) market in which the usefulness of assets as a means of payment or collateral is limited by the threat of fraudulent practices. Agents can produce fraudulent assets at a positive cost, which generates upper bounds on the quantity of each asset that can be traded...

positions that require small reallocations. In such circumstances, welfare can increase if the government steps in, purchases private assets on its own account, and resells them when the economy recovers.

We construct a continuous-time model of incomplete markets where households value both deterministic consumption flows and infrequent and random opportunities of lumpy consumption. Because of lack of commitment and lack of record keeping, households cannot borrow to finance these random...

We develop a model of a two-sided asset market in which trades are intermediated by dealers and are bilateral. Dealers compete to attract order flow by posting the terms at which they execute trades-- which can include prices, quantities, and execution speed--and investors direct their orders...

We study the efficiency of liquidity provision by dealers and the desirability of policy intervention in over-the-counter (OTC) markets during crises. We emphasizes two OTC frictions: finding counterparties takes time, and trade is bilateral and involves bargaining. We model a crisis as a shock...

The authors develop a model of a two-sided asset market in which trades are intermediated by dealers and are bilateral. Dealers compete to attract order flow by posting the terms at which they execute trades, which can include prices, quantities, and execution times, and investors direct their...

We study the dynamics of liquidity provision by dealers during an asset market crash, described as a temporary negative shock to investors aggregate asset demand. We consider a class of dynamic market settings where dealers can trade continuously with each other, while trading between dealers...

We study the dynamics of dealers' inventories during an asset market crash, described as a temporary, negative shock to outside investors' aggregate asset demand. We consider a class of dynamic market settings where trading between dealers and outside investors is subject to delays and requires...

We study an over-the-counter (OTC) market with bilateral meetings and bargaining where the usefulness of assets, as means of payment or collateral, is limited by the threat of fraudulent practices. We assume that agents can produce fraudulent assets at a positive cost, which generates endogenous...

We study the efficiency of dealers' liquidity provision and the desirability of policy intervention in over-the-counter (OTC) markets during crises. Our theory emphasizes two key frictions in OTC markets: finding counterparties takes time, and trade is bilateral, with quantities and prices...