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


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


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)

Suggested Citation

  • Matos, Joao Amaro de & Rosario, Joao Sobral do, 2000. "The Equilibrium Dynamics for an Endogeneous Bid-Ask Spread in a Monopolistic financial Market," FEUNL Working Paper Series wp389, Universidade Nova de Lisboa, Faculdade de Economia.
  • Handle: RePEc:unl:unlfep:wp389

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    References listed on IDEAS

    1. 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.
    2. Garman, Mark B., 1976. "Market microstructure," Journal of Financial Economics, Elsevier, vol. 3(3), pages 257-275, June.
    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. 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.
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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," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 414, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).

    More about this item


    Bid-ask spread; intermediary; dynamic equilibrium;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)


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