Bid-ask spread modelling, a perturbation approach
نویسندگان
چکیده
Our objective is to study liquidity risk, in particular the so-called “limit order books”, as a by-product of market uncertainties. “Limit order books” describe the existence of different sell and buy prices, which we explain by using different risk aversions of the agents. The risky assets follows a local volatility diffusion governed by a Brownian motion which is uncertain. We use the error theory with Dirichlet forms to formalise the notion of uncertainty on the Brownian motion. This uncertainty generates a noise on the trajectories of the underlying assets and we use this noise to expound the presence of a bid-ask spread. In addition, we prove that this noise also has a direct impact on mid-price of risky assets. We enrich our analysis with a numerical simulation when the volatility is a power function of the asset price.
منابع مشابه
The Use Of Financial Ratios as Measures Of Risk In The Determination Of The Bid- Ask Spread In Tehran Stock Exchange
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تاریخ انتشار 2008