منابع مشابه
Optimal market making strategies under inventory constraints
We study the problem of a market-maker acting as a liquidity provider by continuously setting bid and ask prices for an illiquid asset. We assume that the market maker has a contractual obligation to permanently quote bid and ask prices for the security and therefore to satisfy any sell or buy order from the asset’s investors. On the opposite side of the trades, there are investors who act as l...
متن کاملMarket making with asymmetric information and inventory risk
Market makers in over-the-counter markets often make offsetting trades and have significant market power. We develop a market making model that captures this market feature as well as other important characteristics such as information asymmetry and inventory risk. In contrast to the existing literature, a market maker in our model can optimally shift some trade with the informed to other discr...
متن کاملMarket Making with Asymmetric Information, Inventory Risk and Imperfect Competition∗
Existing microstructure literature cannot explain the empirical evidence that bid-ask spreads can decrease with information asymmetry and ignores either information asymmetry or inventory risks. We develop a market making model that highlights the asset pricing impact of market makers’ capability of making offsetting trades in markets where both information asymmetry and inventory risk are sign...
متن کاملOptimal Inventory Control in Market-Making with Risk Aversion
Market-makers have the obligation to trade fixed amounts of assets at quoted bid or ask prices, and their inventories are exposed to the potential loss when the market price moves in an undesirable direction. One approach to reduce the risk associated with price uncertainty is to adjust the inventory at the price of losing potential spread gain. For a single-asset model, we show that a threshol...
متن کاملRole Taking Under Financial Risk Decision Making
This paper explores people’s behavior when they are facing financial risks. Through the setting of an economics experiment, people’s willingness to bear financial risks and their tendency to impose risks on others are investigated. The experiment result shows that most people are risk-neutral or risk-averse when making decision under financial environment, and their tendency to impose risks on ...
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ژورنال
عنوان ژورنال: Review of Derivatives Research
سال: 2009
ISSN: 1380-6645,1573-7144
DOI: 10.1007/s11147-009-9036-3