Dark Markets
I will explain how the opaqueness of some financial markets,
particularly over-the-counter markets, affects the valuation
of assets and investment behavior. Investors in some markets
are often unaware of the "going price," and must
search for suitable trading counterparties. The degree of
market opaqueness is indicated by variation in execution
prices across different trades at a given time, and the
impact of supply shocks and information releases on price
behavior over time. I will review some modeling approaches
and some of the empirical evidence.
Darrell Duffie has been on the finance faculty at Stanford
since receiving his Ph.D. from Stanford in 1984. He has authored
books and research articles on topics in finance and related
fields.
His research interests include incomplete security markets;
derivatives markets; financial risk management; capital
asset pricing theory; preference theory under uncertainty;
security design; term structures of interest rates; credit
risk, systemic risk in capital markets, valuation of corporate
and sovereign debt, swaps, and credit derivatives.
His books include:
Security Markets: Stochastic Models, 1988,
Futures Markets, 1989,
Dynamic Asset Pricing Theory 2001,
Credit Risk, with Kenneth J. Singleton, 2003;
