Market making with asymmetric information and inventory risk

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• 作者：Hong Liu<sup>asup><sup> ; sup><sup>bsup><sup> ; sup><sup>liuh@wustl.edu" class="auth_mail" title="E-mail the corresponding authorsup> ; Yajun Wang<sup>csup><sup> ; sup><sup>ywang22@rhsmith.umd.edu" class="auth_mail" title="E-mail the corresponding authorsup>
• 关键词：D42 ; D53 ; D82 ; G12 ; G18
• 刊名：Journal of Economic Theory
• 出版年：2016
• 出版时间：May 2016
• 年：2016
• 卷：163
• 期：Complete
• 页码：73-109
• 全文大小：803 K

文摘

Market makers in some financial markets often make offsetting trades and have significant market power. We develop a market making model that captures these market features as well as other important characteristics such as information asymmetry and inventory risk. In contrast to the existing literature, a market maker in our model can optimally shift some trades with some investors to other investors by adjusting bid or ask. As a result, we find that consistent with empirical evidence, expected bid&ndash;ask spreads may decrease with information asymmetry and bid&ndash;ask spreads can be positively correlated with trading volume.