This essay surveys the new monetarist approach to liquidity. Work in this literature strives for
empirical and policy relevance, plus rigorous foundations. Questions include: What is …

We survey theoretical developments in the literature on the limits of arbitrage. This literature
investigates how costs faced by arbitrageurs can prevent them from eliminating mispricings …

ABSTRACT I describe asset price dynamics caused by the slow movement of investment
capital to trading opportunities. The pattern of price responses to supply or demand shocks …

This paper investigates how dealers' trading relations shape their trading behavior in the
corporate bond market. Dealers charge lower spreads to dealers with whom they have the …

I propose a new measure that identifies when the market price of an over-the-counter traded
asset is below its fundamental value due to selling pressure. The measure is the difference …

Dealers in the over‐the‐counter municipal bond market form trading networks with other
dealers to mitigate search frictions. Regulatory data show that this network has a core …

We develop a search‐theoretic model of financial intermediation in an over‐the‐counter
market and study how trading frictions affect the distribution of asset holdings and standard …

Exchanges operate limit-order markets where non-synchronous investors can trade. An
early investor can leave a price quote for a late investor to consume. High-tech, informed …

Most assets are traded in multiple interconnected trading venues. This paper develops an
equilibrium model of decentralized markets that accommodates general market structures …

We develop a model of the market for federal funds that explicitly accounts for its two
distinctive features: banks have to search for a suitable counterparty, and once they meet …