Market Price Manipulation in a Sequential Trade Model∗
نویسنده
چکیده
The dynamic version of the Glosten and Milgrom (1985) model of asset pricing with asymmetric information is studied. It is shown that there is a unique equilibrium when the next-period value function of the informed trader, who knows the terminal value of the asset, is strictly convex and strictly monotone in terms of the market maker’s prior belief. A characterization of the bid and ask prices and the informed trader’s manipulative strategy in equilibrium is given. Finally, a computational method for simulating the equilibrium is presented.
منابع مشابه
Price Manipulation, Dynamic Informed Trading and Uniqueness of Equilibrium in a Sequential Trade Model∗
This paper extends the Glosten and Milgrom (1985) model of asset pricing with asymmetric information into a dynamic setting and presents a model of market price manipulation. The paper shows that there is a unique equilibrium and characterizes the equilibrium. It is shown that the nextperiod value function of the informed trader, who knows the terminal value of the asset, is strictly monotone i...
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