easy · Market Microstructure
In the context of market microstructure, what does the term 'adverse selection' specifically refer to for a liquidity provider?
- The risk of trading with a counterparty who possesses superior information about the asset's fundamental value.
- The cost associated with paying exchange fees and regulatory clearing charges for every filled order.
- The risk that the exchange technology will fail during the execution of a high-frequency trade.
- The risk that a dealer will hold too much inventory of a single security during a period of low volatility.
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