medium · Market Microstructure adverse-selection
An analyst estimates the Probability of Informed Trading (PIN) for a security.
If the information event probability α = 0.30, the arrival rate of informed traders μ = 400 per day, and the arrival rates of uninformed buyers and sellers are ε_b = ε_s = 600 per day, what is the PIN value?
- 0.120
- 0.250
- 0.167
- 0.091
Sign up free to see the explanation and track your rank →
More Market Microstructure adverse-selection practice
- To protect against 'adverse selection,' what is the most likely response from the dealer?
- According to the PIN (Probability of Informed Trading) model, if the rate of informed trad
- If the market maker observes a net order imbalance of +10,000 shares (more buyers than sel
- According to the Glosten-Milgrom framework, what is the adverse selection component of the
- If the probability of an informed trader is α = 0.3, what ask price should a competitive d
- If order processing and inventory costs are negligible, what is the competitive bid-ask sp
- If the analyst submits buy orders for 50,000 shares and the market's price impact coeffici
- If the probability of an informed trader is α = 0.2, what is the competitive ask price a d