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- Title
On Optimal Pricing Model for Multiple Dealers in a Competitive Market.
- Authors
Yang, Qing-Qing; Gu, Jia-Wen; Ching, Wai-Ki; Siu, Tak-Kuen
- Abstract
In this paper, the optimal pricing strategy in Avellande and Stoikov (Quant. Finance 8:217-224, 2008) for a monopolistic dealer is extended to a general situation where multiple dealers are present in a competitive market. The dealers' trading intensities, their optimal bid and ask prices and therefore their spreads are derived when the dealers are informed the severity of the competition. The effects of various parameters on the bid-ask quotes and profits of the dealers in the competitive market are also discussed. This study gives some insights on the average spread, profits of the dealers in the competitive trading environment.
- Subjects
CAPITAL assets pricing model; MARKET design &; structure (Economics); PRICING; ASKED price; ECONOMIC competition
- Publication
Computational Economics, 2019, Vol 53, Issue 1, p397
- ISSN
0927-7099
- Publication type
Article
- DOI
10.1007/s10614-017-9749-6