2309. High-Frequency Trading and Risk Sharing Capacity in Market Making with Asymmetric Information
Invited abstract in session WB-9: Algotrading and Market strategies, stream OR in Finance and Insurance .
Wednesday, 10:30-12:00Room: Clarendon SR 2.01
Authors (first author is the speaker)
| 1. | Katsumasa Nishide
|
| Graduate School of Business and Finance, Waseda University |
Abstract
We examine how asymmetric information impacts market liquidity and informational efficiency in a market where some market makers possess high-frequency trading capabilities. Our model includes market makers with varying speeds and informed liquidity traders. We find that the degree of information asymmetry can either enhance or diminish liquidity, depending on the specific market structure. We also demonstrate that an increase in the number of HFT market makers generally improves market liquidity, but can degrade it under certain conditions. Our theoretical findings suggest that the impact of HFT should be carefully assessed, especially in markets with significant information asymmetry.
Keywords
- Finance and Banking
- Financial Modelling
Status: accepted
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