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The present limit order book for stock A looks like the following: Price ($) Quantity (# of shares) ask5 10.5 50,000 ask4 10.4 45,000 ask3
The present limit order book for stock A looks like the following: | ||
Price ($) | Quantity (# of shares) | |
ask5 | 10.5 | 50,000 |
ask4 | 10.4 | 45,000 |
ask3 | 10.3 | 5,000 |
ask2 | 10.25 | 20,000 |
ask1 | 10.2 | 10,000 |
bid1 | 10.1 | 5,000 |
bid2 | 10.05 | 10,000 |
bid3 | 10 | 4,000 |
bid4 | 9.9 | 10,000 |
bid5 | 9.85 | 20,000 |
Discuss the dynamics of new trades and change of the limit order book if there is an | ||
a) Arrival of a sell @$10.15, Q=5000 | ||
b) Arrival of a sell @$10.10, Q=5000 | ||
c) Arrival of a market sell Q=18,000 | ||
d) Discuss who tends to use market orders? Informed traders or uninformed traders? Why? | ||
e) Discuss who tends to consume (provide) liquidity? Informed traders or uninformed traders? Can you use cases (a) to (c) above to give an example? |
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