Electronic Resource
Boston, USA and Oxford, UK
:
Blackwell Publishers Inc
Mathematical finance
11 (2001), S. 0
ISSN:
1467-9965
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Mathematics
,
Economics
Notes:
We derive necessary and sufficient conditions for a linear equilibrium in three types of competitive market making models: Kyle type models (when market makers only observe aggregate net order flow), Glosten–Milgrom and Easley–O'Hara type models (when market makers observe and trade one order at a time), and call markets models (individual order models when market makers observe a number of orders before pricing and executing any of them). We study two cases: when privately informed (strategic) traders are symmetrically informed and when they have differential information. We derive necessary and sufficient conditions on the distributions of the random variables for a linear equilibrium. We also explore those features of the equilibrium that depend on linearity as opposed to the particular distributional assumptions and we provide a large number of examples of linear equilibria for each of the models.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/1467-9965.00106
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