On optimal pricing model for multiple dealers in a competitive market

Qing Qing Yang; Jia-Wen Gu; Wai-Ki Ching; Tak Kuen Siu

doi:10.1007/s10614-017-9749-6

On optimal pricing model for multiple dealers in a competitive market

Qing Qing Yang, Jia-Wen Gu, Wai-Ki Ching, Tak Kuen Siu

Department of Actuarial Studies and Business Analytics

Research output: Contribution to journal › Article › peer-review

2 Citations (Scopus)

Abstract

In this paper, the optimal pricing strategy in Avellande and Stoikov (Quant. Finance 8:217–224, 2008) for a monopolistic dealer is extended to a general situation where multiple dealers are present in a competitive market. The dealers’ trading intensities, their optimal bid and ask prices and therefore their spreads are derived when the dealers are informed the severity of the competition. The effects of various parameters on the bid-ask quotes and profits of the dealers in the competitive market are also discussed. This study gives some insights on the average spread, profits of the dealers in the competitive trading environment.

Original language	English
Pages (from-to)	397-431
Number of pages	35
Journal	Computational Economics
Volume	53
Issue number	1
Early online date	20 Sept 2017
DOIs	https://doi.org/10.1007/s10614-017-9749-6
Publication status	Published - 31 Jan 2019

Keywords

Bid and ask quotes
HJB equations
Limit order book
Multiple dealers
Optimal pricing

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10.1007/s10614-017-9749-6

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On optimal pricing model for multiple dealers in a competitive market

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Keywords

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