Ignorance Essay Examples

Problem 2

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ignorance of the value, the modelling of the pricing for both ask and bid would be: 0 < bn ≤ an < 1 The trading price model is guided by the impression of the value remaining unknown, and the possibility of settling at 1 as its optimal. Assuming MMn2 is informed of the value, then the guiding model would be guided by the established information. The new model would indicate: 1 < bn ≤ an > 1 In the pricing model for the informed MM, the bid price is beyond that the uninformed MM, while the asking price is below that of the informed counterpart. Show that the lowest c such that no MM becomes informed in equilibrium is c = 1/4. That is to say, MMs will be uninformed for c > 1/4,...

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  • Pages: 4
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