FRIC/Finance seminar with Nils Friewald, Norwegian School of Economics
The Department of Finance is proud to announce the upcoming FRIC/Fiance seminar with Nils Friewald, Norwegian School of Economics.
Nils Friewald will present:
We empirically study how intermediation frictions in over-the-counter (OTC) markets affect asset prices. Using transactions data on U.S. corporate bonds, we find that inventory, search, and bargaining frictions capture 10 percentage points in the variation of yield spread changes beyond standard pricing factors. This result implies that these OTC market frictions account for one-third of the explained variation in yield spread changes. We show that the intermediation premium of dealers reflects the intensity of OTC market frictions. Overall, our results confirm the asset pricing implications
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