hard · Market Microstructure
In a Glosten-Milgrom adverse selection model, an asset has a high fundamental value V_H =120and a low valueV_L = 80 with equal prior probabilities.
If the probability that an incoming order is from an informed trader is α = 0.25, what is the competitive dealer's ask price P_ask?
- $100.00
- $110.00
- $105.00
- $102.50
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