TY  - JOUR
AU  - Duffie,Darrell
AU  - Garleanu,Nicolae
AU  - Pedersen,Lasse Heje
TI  - Valuation in Over-the-Counter Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12020
PY  - 2006
Y2  - February 2006
UR  - http://www.nber.org/papers/w12020
L1  - http://www.nber.org/papers/w12020.pdf
N1  - Author contact info:
Darrell Duffie
Graduate School of Business
Stanford University
Stanford, CA  94305-5015
Tel: 650/723-1976
Fax: 650/725-7979
E-Mail: duffie@stanford.edu

Nicolae B. Garleanu
Haas School of Business
F628
University of California, Berkeley
Berkeley, CA 94720
Tel: (1) 510 642 3421
Fax: (1) 510 643 1420
E-Mail: garleanu@haas.berkeley.edu

Lasse H. Pedersen
NYU Stern Finance
44 West Fourth Street
Suite 9-190
New York, NY 10012
Tel: 212/998-0359
Fax: 212/995-4233
E-Mail: lpederse@stern.nyu.edu
AB  - We provide the impact on asset prices of search-and-bargaining frictions in over-the-counter markets. Under certain conditions, illiquidity discounts are higher when counterparties are harder to find, when sellers have less bargaining power, when the fraction of qualified owners is smaller, or when risk aversion, volatility, or hedging demand are larger. Supply shocks cause prices to jump, and then "recover" over time, with a time signature that is exaggerated by search frictions. We discuss a variety of empirical implications.
ER  -