Zusammenfassung der Ressource
Spread Reduces
Costs of Dealing
- Order processing costs
- Financing for inventory
- Wages
- Rent
- Membership fees
- Telecommunications
- Clearing and settlement
- Accounting
- Utilities
- Inventory holding costs
- Inventories are too low
or clients are net buyers
- Inventories are too high
or clients are net sellers
- Expensive to quickly adjust
inventory position
- Regular turnover desired
- Adverse selection costs
- Trade is equally likely to occur at bid or ask
- No knowledge whether trader is informed or uninformed
- Trading occurs between
informed and uninformed
investors
- Kyle's types of traders
- Informed traders with perfect info
- Problem: Profit maximisation
- Uninformed noise traders
- Tries to discern trades from informed traders
- Single dealer as intermediary
- Price adjustment
- Well informed
- Lower adverse
selection costs
- Hold larger inventory
- Hold longer lived inventory
- Earn larger realised spreads
- Value traders
- Trade when prices diverge
significantly from fundamental
values
- Poorly informed
- Turn over
positions quickly
- Earn smaller
realised spreads
- Reducing adverse
selection costs
- Time slicing
- Adjust quotes
- Buy at ask
- Do nothing