Strategic Liquidity Provision and Extreme Volatility Spikes
研究了极端波动飙升期间流动性供给的竞争理论，发现流动性提供者策略性地允许价格压力并通过纠正定价错误获得补偿，这与做市约束导致流动性恶化的普遍担忧相反。
We test competing theories of liquidity dynamics during extreme volatility spikes (EVSs). We find that liquidity providers strategically allow for price pressures and are compensated from correcting pricing errors. As a result, liquidity provision intensifies toward the end of a typical EVS. This goes counter to a widespread concern that market-making constraints cause liquidity to deteriorate as EVSs develop. The prevailing limit order book dynamics during EVSs are in line with the socially beneficial equilibrium presented in the theoretical literature. This paper was accepted by Agostino Capponi, finance. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2022.04104 .