Abstract:Providing liquidity in over-the-counter markets is a challenging under-taking, in large part because a market maker does not observe where their competitors quote, nor do they typically know how many rivals they compete with or what the trader's overall liquidity demand is. Optimal pricing strategies can be derived in theory assuming full knowledge of the competitive environment, but these results do not translate into practice where information is incomplete and asymmetric. This paper studies whether artifici… Show more
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