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Title: The optimal pricing of a market maker in a heterogeneous agent economy
Authors: 陳樹衡
Guo, Bin;Zhang, Wei;Chen, Shu-Heng;Zhang, Yongjie
Contributors: 經濟系
Keywords: Market-maker trading mechanism;Bid-ask prices;Heterogeneous agent economy
Date: 2015-09
Issue Date: 2016-01-11 14:27:50 (UTC+8)
Abstract: This paper extends some classical models, built upon the representative-agent and Walrasian market-clearing mechanism, into one characterized by a market-maker trading mechanism with investors having heterogeneous beliefs regarding the likely future payoff of a risky security. We show the optimal determination of the bid and ask prices and resultant trading volume. The endogenously-determined spread and volume are increasing with the degree of the heterogeneity of investors’ beliefs. We analyze the market marker’s risk exposure based on his inventory, under the condition in which he is fully informed of the investors’ beliefs, and under the condition in which he is not.
Relation: Finance Research Letters,14,178-187
Data Type: article
DOI 連結:
Appears in Collections:[經濟學系] 期刊論文

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