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Question 1 The following question refers to the Glosten-Milgrom Model and Kyle Model. a. Explain the basic structure of the Glosten and Milgrom Model with
Question 1 The following question refers to the Glosten-Milgrom Model and Kyle Model. a. Explain the basic structure of the Glosten and Milgrom Model with regard to the (1) Traders, (2) Market Maker, and (3) Trading Structure. How are bid and ask prices determined? b. What are the differences between the Kyle Model and the Glosten Milgrom Model? Which assumptions is the Kyle Model based on? c. Based on which economic concept is the equilibrium of the Kyle model determined? Describe and interpret the equilibrium from an economic perspective.
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