This paper presents a model of a quote-driven market with asymmetric information. The model is similar to the Glosten-Milgrom (1985) model, except that we allow the informed trader to optimally time his trades, rather than employing a probabilistic selection process for informed and uninformed trades. The contribution of the paper is to show that the probabilistic arrival process is a robust as...

Most stock markets are characterized by a number of parallel operating trading systems which interact intensively with each other. Usually, smaller trading platforms take the leading domestic main market as a benchmark in the price discovery process and for closing open trading positions. But what happens if the smaller trading systems suddenly have to act without this benchmark platform? We ex...

This paper characterizes how the short-lived nature of derivative securities, such as option and futures contracts, affects trading behavior and pricing. Specifically, the paper explores strategic trade in short-lived derivative securities by agents that possess long-term information about an underlying asset. In contrast to trading equity, where an informed agent will ultimately benefit from h...

The Probability of Informed Trading (PIN) is a widely used indicator information asymmetry risk in the trading securities. Its estimation using maximum likelihood algorithms has been shown to be problematic, resulting biased or unavailable estimates, especially case liquid and frequently traded assets. We provide an alternative approach estimating PIN by means Bayesian method that addresses som...