Equilibrium in a dynamic limit order market

Deskripsi

We model a dynamic limit order market as a stochastic sequential game with rational traders. Since the model is analytically intractable, we provide an algorithm based on Pakes and McGuire ( 2001 ) to find a stationary Markov-perfect equilibrum. We then generate artificial time series and perform comparative dynamics. Conditional on atransaction, the midpoint of the quoted prices is not a good proxy for the true value. .Printed Journal