Download This PaperA Visual Guide to Market Microstructure Models
9 Pages Posted: 21 Apr 2025
Date Written: April 20, 2025
Abstract
In this note, I provide geometric interpretations of the classic asymmetric information models of Kyle (1985) and Glosten and Milgrom (1985). This visual approach helps to better understand how market makers infer private information from order flow and how prices adjust in response.
Keywords: Market microstructure, Kyle, Glosten-Milgrom
JEL Classification: G14, D4, D82
Suggested Citation: Suggested Citation
Aliyev, Nihad, A Visual Guide to Market Microstructure Models (April 20, 2025). Available at SSRN: https://ssrn.com/abstract=5223780 or http://dx.doi.org/10.2139/ssrn.5223780
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