On the Existence of Linear Equilibria in the Rochet-Vila Model of Market Making

16 Pages Posted: 27 Oct 2004

See all articles by Georg Nöldeke

Georg Nöldeke

University of Basel; University of Basel

Thomas Tröger

University of Bonn - Institute of Economic Theory III - Department of Economics

Date Written: October 25, 2004

Abstract

This paper derives necessary and sufficient conditions for the existence of linear equilibria in the Rochet-Vila model of market making. In contrast to most previous work on the existence of linear equilibria in models of market making, we do not impose independence of the underlying random variables. For distributions that are determined by their moments we show that a linear equilibrium exists if and only if the joint distribution of noise trade and asset payoff is elliptical.

Keywords: Market making, market microstructure, linear equilibria

JEL Classification: G14, D82

Suggested Citation

Nöldeke, Georg and Tröger, Thomas, On the Existence of Linear Equilibria in the Rochet-Vila Model of Market Making (October 25, 2004). Available at SSRN: https://ssrn.com/abstract=609902 or http://dx.doi.org/10.2139/ssrn.609902

Georg Nöldeke (Contact Author)

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

HOME PAGE: http://sites.google.com/site/georgnoldeke/

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

HOME PAGE: http://sites.google.com/site/georgnoldeke/

Thomas Tröger

University of Bonn - Institute of Economic Theory III - Department of Economics ( email )

Postfach 2220
D-53012 Bonn
Germany

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