A learning market-maker in the Glosten–Milgrom model

@inproceedings{Das2005ALM,
  title={A learning market-maker in the Glosten–Milgrom model},
  author={Sanmay Das},
  year={2005}
}
This paper develops a model of a learning market-maker by extending the Glosten-Milgrom model of dealer markets. The market-maker tracks the changing true value of a stock in settings with informed traders (with noisy signals) and liquidity traders, and sets bid and ask prices based on its estimate of the true value. We empirically evaluate the performance of the market-maker in markets with different parameter values to demonstrate the effectiveness of the algorithm, and then use the algorithm… CONTINUE READING

Figures and Tables from this paper.

Citations

Publications citing this paper.
SHOWING 1-10 OF 34 CITATIONS

A new model of a market maker

VIEW 16 EXCERPTS
CITES METHODS
HIGHLY INFLUENCED

The effects of market-making on price dynamics

  • AAMAS
  • 2008
VIEW 10 EXCERPTS
CITES BACKGROUND & METHODS

Simulating market maker behaviour using Deep Reinforcement Learning to understand market microstructure

Elwin Marcus
  • 2018
VIEW 5 EXCERPTS
CITES BACKGROUND & METHODS
HIGHLY INFLUENCED

References

Publications referenced by this paper.
SHOWING 1-10 OF 13 REFERENCES

A theory of power law behavior in financial market

X. Gabaix, P. Gopikrishnan, V. Plerou, H. E. Stanley
  • fluctuations. Nature,
  • 2003
VIEW 1 EXCERPT

A theory of power law behavior in financial market fluctuations

F. Lillo
  • Nature
  • 2003

Sixteenths or pennies? Observations from a simulation of the Nasdaq stock market

  • Proceedings of the IEEE/IAFE/INFORMS 2000 Conference on Computational Intelligence for Financial Engineering (CIFEr) (Cat. No.00TH8520)
  • 2000
VIEW 2 EXCERPTS

Statistical properties of the volatility of price fluctuations.

  • Physical review. E, Statistical physics, plasmas, fluids, and related interdisciplinary topics
  • 1999
VIEW 1 EXCERPT