medium · Market Microstructure adverse-selection
In a Glosten-Milgrom setting, the true value V is either VH = 52 or VL = 48 with equal probability.
If the probability of an informed trader is α = 0.3, what ask price should a competitive dealer set to ensure zero expected profit?
- $50.60
- $50.30
- $51.20
- $52.00
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