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Computing posterior signals and endogenous parameters in a dealer trading network

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  • Giannikos, Christos I.
  • Kyei-Fordjour, Richmond

Abstract

A numerical procedure to obtain posterior valuation signals in a theoretical equilibrium of an interdealer trading network is derived by harnessing a transformation of the adjacency matrix of the network. Applying transaction prices and quantities, the procedure leads to recovery of the endogenous parameters of the network.

Suggested Citation

  • Giannikos, Christos I. & Kyei-Fordjour, Richmond, 2021. "Computing posterior signals and endogenous parameters in a dealer trading network," Economics Letters, Elsevier, vol. 207(C).
    • Handle: RePEc:eee:ecolet:v:207:y:2021:i:c:s0165176521002779
    DOI: 10.1016/j.econlet.2021.110000
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    References listed on IDEAS

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    1. Ana Babus & Péter Kondor, 2018. "Trading and Information Diffusion in Over‐the‐Counter Markets," Econometrica, Econometric Society, vol. 86(5), pages 1727-1769, September.
    2. Xavier Vives, 2011. "Strategic Supply Function Competition With Private Information," Econometrica, Econometric Society, vol. 79(6), pages 1919-1966, November.
    3. Bloch, Francis & Dutta, Bhaskar, 2009. "Communication networks with endogenous link strength," Games and Economic Behavior, Elsevier, vol. 66(1), pages 39-56, May.
    4. Ana Babus & Péter Kondor & Yilin Wang, 2020. "Corrigendum to “Trading and Information Diffusion in Over‐the‐Counter Markets”," Econometrica, Econometric Society, vol. 88(5), pages 2221-2228, September.
    5. Dev, Pritha, 2018. "Networks of information exchange: Are link formation decisions strategic?," Economics Letters, Elsevier, vol. 162(C), pages 86-92.
    6. Albert S. Kyle, 1989. "Informed Speculation with Imperfect Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(3), pages 317-355.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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