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The Equilibrium Dynamics for an Endogeneous Bid-Ask Spread in a Monopolistic financial Market

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  • Matos, Joao Amaro de
  • Rosario, Joao Sobral do

Abstract

This paper presents an endogeneous model for the stochastic dynamics of the bid-ask spread of prices of nancial assets. The model is derived introducing an intermediary and inventory costs in the setting of equilibrium financial markets as described by Platen and Rebolledo (1996)

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File URL: http://fesrvsd.fe.unl.pt/WPFEUNL/WP2000/wp389.pdf
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Bibliographic Info

Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp389.

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Length: 8 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:unl:unlfep:wp389

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Related research

Keywords: Bid-ask spread; intermediary; dynamic equilibrium;

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References

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  1. Easley, David & O'Hara, Maureen, 1987. "Price, trade size, and information in securities markets," Journal of Financial Economics, Elsevier, vol. 19(1), pages 69-90, September.
  2. Ho, Thomas S Y & Macris, Richard G, 1984. " Dealer Bid-Ask Quotes and Transaction Prices: An Empirical Study of Some AMEX Options," Journal of Finance, American Finance Association, vol. 39(1), pages 23-45, March.
  3. Joel Hasbrouck, 1999. "The Dynamics of Discrete Bid and Ask Quotes," Journal of Finance, American Finance Association, vol. 54(6), pages 2109-2142, December.
  4. Garman, Mark B., 1976. "Market microstructure," Journal of Financial Economics, Elsevier, vol. 3(3), pages 257-275, June.
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Cited by:
  1. Matos, João Manuel Gonçalves Amaro de & Fernandes, Marcelo, 2001. "Testing The Markov Property with Ultra High Frequency Financial Data," Economics Working Papers (Ensaios Economicos da EPGE) 414, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).

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