IDEAS home Printed from https://ideas.repec.org/p/fth/aixmeq/97a17.html
   My bibliography  Save this paper

A Decision Theoretic Approach to Bid-Ask Spreads

Author

Listed:
  • Kast, R.
  • Lapied, A.

Abstract

Preorder representation results are applied to a normative valuation theory for dealers setting bid-ask spreads in a dynamic framework. The preorders induced by ask and bid prices of marketed assets should satisfy some axioms in order for prices not to yield arbitrage opportunities to traders and not to be such that assets could have zero demands. In a discrete time dynamic model for marketed assets with comonotone payoffs (e.g. markets for options on an underlying security or bond markets) the price functional at each date is shown to be a Choquet integral of discounted asset payoffs next period. Such Bid-ask spreads amount for inventory risk.

Suggested Citation

  • Kast, R. & Lapied, A., 1997. "A Decision Theoretic Approach to Bid-Ask Spreads," G.R.E.Q.A.M. 97a17, Universite Aix-Marseille III.
  • Handle: RePEc:fth:aixmeq:97a17
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alain Chateauneuf & Robert Kast & André Lapied, 2001. "Conditioning Capacities and Choquet Integrals: The Role of Comonotony," Theory and Decision, Springer, vol. 51(2), pages 367-386, December.
    2. André Lapied & Robert Kast, 2010. "Dynamically consistent Choquet random walk and real investments," Working Papers 10-21, LAMETA, Universitiy of Montpellier, revised 2010.
    3. Trabelsi, Mohamed Ali, 2010. "Choix de portefeuille: comparaison des différentes stratégies
      [Portfolio selection: comparison of different strategies]
      ," MPRA Paper 82946, University Library of Munich, Germany, revised 01 Dec 2010.

    More about this item

    Keywords

    INFORMATION ; PRICING;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fth:aixmeq:97a17. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel). General contact details of provider: http://edirc.repec.org/data/greqafr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.