Strategic Liquidity Provision in Limit Order Markets
研究了有限数量风险中性流动性提供者在限价订单市场中的纳什均衡存在性，发现足够逆向选择时点态优化可产生均衡，且该条件不随提供者数量增加而消失。
We characterize and prove the existence of Nash equilibrium in a limit order market with a finite number of risk-neutral liquidity providers. We show that if there is suffi- cient adverse selection, then pointwise optimization (maximizing in p for each q) in a certain nonlinear pricing game produces a Nash equilibrium in the limit order market. The need for a sufficient degree of adverse selection does not vanish as the number of liquidity providers increases. Our formulation of the nonlinear pricing game en- compasses various specifications of informed and liquidity trading, including the case in which nature chooses whether the market-order trader is informed or a liquidity trader. We solve for an equilibrium analytically in various examples and also present examples in which the first-order condition for pointwise optimization does not define an equilibrium, because the amount of adverse selection is insufficient.