hard · Market Microstructure mmf-core
A market maker using the Glosten-Milgrom model believes there is a 30% probability (α = 0.3) that an incoming order is from an informed trader. The asset's true value is either $52 or $48 with equal probability (δ = 0.5).
What is the competitive ask price the dealer should set to ensure zero expected profit?
- $50.00
- $51.20
- $50.60
- $50.30
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