Trading Markets With Information Asymmetry And Search Friction And Corresponding Intervention Strategies

China's bond market is becoming more and more mature and has gradually come into a new stage of development.However,in the past two years,there has been a gradual upturn in the debt-defaults in bond markets.From the micro level,China is facing downward economic pressure and the slowing-down growth rate.The negative situation of economic background promote the debt-defaults' increase.From the micro level,the enterprises have not changed from the era of rapid economic growth in the past,and some may not change,which inevitably exacerbates the exposure of the bond defaults.How to deal with default bonds,to ensure the stability and the continuity of the market has become the hot topic in industry in recent years.The purpose of this paper is to study the trading dynamics in an asset market where the quality of assets is private and finding a counterparty takes time.Moreover,when trading ceases in equilibrium as a response to an adverse shock to asset quality,the government can resurrect the market by purchasing bad assets not taking into account of financial losses.This paper purposes to find the optimal intervention strategies through a large number of models and reasonable parameter settings to provide policy makers with advice on when and how to intervene in the market.Trying to demonstrate the rationality of the government's intervention to the market in the presence of information asymmetry and search frictions,which is one of the most important safeguards to the market's stability.Finally,this paper comes to the conclusion that ensuring the continuity of the market is more necessary for the market than the social costs of the intervention,where search frictions are important for all these results.There are two optimal intervention strategies,the first is to intervene immediately,another choice is when the intervention involves the use of the notice effect to delay the intervention time,in order to ensure the market liquidity and continuity,giving the market a certain amount of compensation,in other words,paying enough option value is the optimal choice.