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Thierry Foucault

22 September 2026
DISCUSSION PAPER SERIES - No. 32
Artificial intelligence and financial markets
English
Details
Abstract
Artificial intelligence is transforming financial markets by enabling investors and intermediaries to extract more information from increasingly abundant data through advances in algorithms and computing power. We discuss how AI changes information production and decision-making, labor demand, and financial intermediation, with a particular emphasis on securities markets. We then survey the implications of this transformation for market efficiency, competition, informational frictions, and financial stability.
JEL Code
G1 : Financial Economics→General Financial Markets
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
26 February 2021
WORKING PAPER SERIES - No. 2529
Inventory management, dealers’ connections, and prices in OTC markets
English
Details
Abstract
We propose a new model of trading in OTC markets. Dealers accumulate inventories by trading with end-investors and trade among each other to reduce their inventory holding costs. Core dealers use a more efficient trading technology than peripheral dealers, who are heterogeneously connected to core dealers and trade with each other bilaterally. Connectedness affects prices and allocations if and only if the peripheral dealers’ aggregate inventory position differs from zero. Price dispersion increases in the size of this position. The model generates new predictions about the effects of dealers' connectedness and dealers' aggregate inventories on prices.
JEL Code
G10 : Financial Economics→General Financial Markets→General
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G19 : Financial Economics→General Financial Markets→Other