This study examines the effect of corporate ownership on information asymmetry as measured by bid-ask spread in the emerging markets of China. Government ownership has significant and positive impacts on bid-ask spread during the period 1995-2000, but disappears afterward during 2001-2003. The finding that state ownership raised bid-ask spread in the early period is consistent with recent studi...

We model competition for liquidity provision between high-frequency traders (HFTs) and slower execution algorithms (EAs) designed to minimize investors’ transaction costs. Under continuous pricing, EAs dominate by using aggressive limit orders stimulate HFTs’ market orders. discrete HFTs if the bid-ask spread is binding at one tick. If tick size (minimum price variation) not binding, choose sti...

Using a stochastic sequential game in ergodic equilibrium, this paper models limit order book trading dynamics. It deduces investor surplus and some agents’ strategies from depth’s stationarity, while bypassing altogether agents’ intricate forecasting problems. Market inefficiency adjusts to induce equal supply and demand for liquidity over time. Consequently, at a given bid-ask spread surplus ...

We apply Reinforcement Learning algorithms to solve the classic quantitative finance Market Making problem, in which an agent provides liquidity market by placing buy and sell orders while maximizing a utility function. The optimal has find delicate balance between price risk of her inventory profits obtained capturing bid-ask spread. design environment with reward function that determines orde...

Lemma 2 (Best Prevailing Bid/Ask-Prices) We present below the derivation for the dynamics of the best ask price; the dynamics for the best bid price are derived in a similar way. The exponential decay Assumption 4, specifies the dynamics of the best ask price over period τ . The best ask price at n, before the trade at n arrives, depends on the previous displacement ∗Tsoukalas ([email protected]...

• Bollerslev and Domowitz (1993) used computer simulations to study the effects of varying the length of an electronic order book. They state that the appearance and increasing persistence of serial correlation in the variance of transactions price returns is traced to the existence and length of the electronic book, as is the degree of non-normality in transactions returns. Whilst increases in...