2026/07/13 by Alexander Barzykin · 1 voice
Economics, Econometrics and Finance · #q-fin.MF #q-fin.RM
arxiv published 2026/07/13 · arxiv updated 2026/07/15
Electronic over-the-counter (OTC) liquidity provision is increasingly shaped not only by the price of the next quote, but also by a dealer's accumulated standing with clients and platforms. We develop a stochastic-control model in which request-for-quote (RFQ) win ratios and streaming fill ratios feed back into future flow through performance-based flow gates, creating an explicit trade-off between immediate spread capture and long-term franchise value. The resulting policy naturally alternates between reputation-building campaigns and franchise monetization phases, and can generate multiple stable client-flow regimes even in a parsimonious single dealer control problem.