Hugues Dastarac

I am an economist at Banque de France. My research focuses on traders in financial and commodities markets, and derivative products. 

I am also an affiliate professor at Ecole Polytechnique in the Bachelor program, providing students with the basics of asset pricing, corporate finance and financial markets. 

Prior to my PhD, I spent three years supervising insurance companies at the French Prudential Control Authority (ACPR). 

Working papers

Imperfect Competition and the Financialization of Commodities Markets 

I study a model of imperfectly competitive spot and futures markets where physical traders participate in the spot market, and financial traders do not. Physical traders' current spot trades influence the future spot price: this implies that without financial traders, they do not use futures for hedging and have lower welfare than without futures. Financial traders raise or decrease prices, induce greater price movements, but improve futures market liquidity. The latter effect incentivizes physical traders to hedge with futures, entailing welfare gains on both sides of the physical market. I derive testable implications for quantities and the futures-spot basis.

Market making and proprietary trading in the US corporate bond market  (new version coming soon)

I study broker-dealers' trading activity in the US corporate bond market. I show that broker-dealers act as market makers half of the time, when customers both buy and sell a bond in a day: as predicted by market making theories with adverse selection or inventory costs, prices go down (up) as customers sell (buy). The other half, broker-dealers do proprietary trading as in limits of arbitrage theories: prices go up (down) when customers sell (buy), and dealers buy (sell) bonds that were cheap (expensive) with respect to bonds of similar maturity, or with respect to Treasury bonds. These proprietary trading strategies are reduced after the crisis. Relatedly I show that before the crisis, large broker-dealers borrowed and sold Treasury bonds in amounts similar to their corporate bond holding, but not after. I give suggestive evidence that they were subject to a severe tightening of their financing constraints as early as July 2007 with no obvious link to this long corporate, short Treasury strategy.

Endogenous market fragmentation with dynamic trading

I study the opportunity for dealers, i.e. intermediaries in financial markets to open restricted markets parallel to a centralized, all-to-all market. In a dynamic trading model with imperfect competition, dealers have the opportunity to open a parallel market so that a restricted subset of them trades with customers. Dealers in the parallel market choose to have all customer trades in the parallel market, which makes both customers and dealers not trading in the parallel market worse off. Before dealers learn whether they will have an opportunity to trade with customers in the parallel market, they choose to open the parallel market, as long as the surplus from future transactions are sufficiently high compared with the cost of holding the asset until future transaction, highlighting the role of dynamic trading rent.

Work in progress

Physical and Financial Fragmentation in European Natural Gas Market: Theory and Evidence, with Arthur Stalla-Bourdillon

Imperfect Competition in the European Carbon Market, with Martin Saillard

Quantitative easing and tightening: the role of forward guidance

Policy publications

Convergence Trading, Arbitrage and Systemic Risk in the United States, Bulletin de la Banque de France, May-June 2021

An informal analysis of the role of arbitrageurs/convergence traders in US Treasury and related markets during the 1999, 2008 and 2020 Covid crises. The role of leverage, and the Fed's interventions or non-intervention seems to determine the severity of the crisis. The Fed could have countered a run on Primary Dealers' short Treasury position in July 2007 to avoid part of the subsequent turmoil. 

Teaching

Ecole Polytechnique : 

• Introduction to Finance (since 2022), Bachelor, 2nd year. 

Past courses

• Sciences Po (2012-2013): Macroeconomics, Bachelor, 1st year

CV

Education

• 2014-2020: PhD, Toulouse School of Economics

  • 2016-2017: Visiting graduate student, MIT Sloan School of Management

• 2010: M.Sc. Economics, Paris School of Economics

• 2008: B.Sc. Applied Mathematics, Ecole Polytechnique (Paris)

Non-academic experience

• 2017-present: Economist, Bank of France

• 2010-2014: Insurance supervisor, French prudential supervision authority (ACPR)