Size Discovery
Size-discovery trade mechanisms allow large quantities of an asset to be exchanged at a price that does not respond to price pressure. Primary examples include “workup” in Treasury markets, “matching sessions” in corporate bond and CDS markets, and block-trading “dark pools” in equity markets. By freezing the execution price and giving up on market-clearing, size-discovery mechanisms overcome concerns by large investors over their price impacts. Price-discovery mechanisms clear the market, but cause investors to internalize their price impacts, inducing costly delays in the reduction of position imbalances. We show how augmenting a price-discovery mechanism with a size-discovery mechanism improves allocative efficiency.
-
-
Copy CitationDarrell Duffie and Haoxiang Zhu, "Size Discovery," NBER Working Paper 21696 (2015), https://doi.org/10.3386/w21696.Download Citation
-
Published Versions
Darrell Duffie & Haoxiang Zhu, 2017. "Size Discovery," The Review of Financial Studies, vol 30(4), pages 1095-1150. citation courtesy of 
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
