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Liquidity drops

Author

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  • Giacomo Morelli

    (LUISS University)

Abstract

This papers examines the connection between the trading market and liquidity in a simple model with informed and uninformed traders. When agents in the market have plenty of information, assets are traded frequently. However, when news arrives the informed trader behaves as predator making profit from that news, this in turn leading to sudden drops in liquidity which I refer to as liquidity drops.

Suggested Citation

  • Giacomo Morelli, 2021. "Liquidity drops," Annals of Operations Research, Springer, vol. 299(1), pages 711-719, April.
    • Handle: RePEc:spr:annopr:v:299:y:2021:i:1:d:10.1007_s10479-019-03285-0
    DOI: 10.1007/s10479-019-03285-0
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    References listed on IDEAS

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    1. Axel Grorud & Monique Pontier, 1998. "Insider Trading in a Continuous Time Market Model," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 1(03), pages 331-347.
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