Market makers have to continuously set bid and ask quotes for the stocks they have under consideration. Hence they face a complex optimization problem in which their return, based on the bid-ask spread they quote and the frequency they indeed provide liquidity, is challenged by the price risk they bear due to their inventory. In this paper, we provide optimal bid and ask quotes and closed-form ...

This paper presents evidence of long-range dependence in bid–ask prices for individual equity prices in the Brazilian stock market. Moreover, using the Hurst exponent calculated by the Local Whittle method as a measure of long-range dependence, we find evidence supporting that bid–ask prices shows a stronger long-range dependence than the one usually found in closing and opening prices. Finally...

This study proposes a versatile model for the dynamics of best bid and ask prices using an extended Hawkes process. The incorporates zero intensities spread-narrowing processes at minimum bid-ask spread, spread-dependent intensities, possible negative excitement, nonnegative intensities. We apply to high-frequency price data from US stock markets. empirical findings demonstrate tendency, excita...