The vast majority of real assets, such as houses, cars, airplanes, innovations and ideas, and a large volume of financial assets, such as derivative securities, federal funds, unlisted stocks and most fixed-income securities, are traded in over-the-counter (OTC) markets. OTC markets operate in a completely decentralized manner: trade is bilateral, with prices and quantities negotiated by the parties involved in each trade. Asset markets have traditionally been the realm of the Walrasian paradigm. Trade in these markets is typically regarded as an instantaneous and costless process---and left unmodeled.

The objective of this conference is to bring together papers that model explicitly the trading process in various asset markets. The search-based approach is appealing because it can parsimoniously rationalize standard measures of liquidity, uncover new propagation mechanisms and it emphasizes informational frictions. It can also help understanding the role of various middlemen as providers of liquidity in times of crisis. Different formalizations of the trading frictions will be discussed.

Participants will include economists affiliated with US and foreign academic institutions. UCSB Economics Department faculty and interested graduate students will also participate. The conference will begin with a kick-off dinner on December 6, 2007, with two full days of presentations to follow. The complete schedule of events can be found on the "Agenda" link of this website.