Equilibrium in A Dynamic Limit Order Market  

Oleh:

Goettler, Ronald L. ; Rajan, Uday ; Parlour, Christine A.

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 60 no. 5 (Oct. 2005), page 2149-2192.
Topik: equilibrium; studies; economic models; game theory; algorithms; markov analysis; capital markets; time series; equilibrium
Fulltext: p 2149.pdf (334.85KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

We model a dynamic limit order market as a stochastic sequential game with rational traders. Since the model is analytically intractable, we provide an algorithm based on pakes and mcguire (2001) to find a stationary. Markov - perfect equilibrium. We then generate artificial time series and perform comparative dynamics. Conditional in a transaction, the midpoint of the quoted prices is not a good proxy for the true value. Further transaction costs paid by market order submitters are negative on average, and negatively correlated with the effective spread. Reducing the tick size is not pareto improving but increases total investor surplus.

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