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SUMMARY:Large Orders in Small Markets: On Optimal Execution with Endogenou
 s Liquidity Supply - Albert J. Menkveld (VU University Amsterdam)
DTSTART:20200611T120000Z
DTEND:20200611T130000Z
UID:TALK131341@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:We solve a Stackelberg game where a large uninformed seller ex
 ecutes optimally\, fully cognizant of the response of Cournot-competitive 
 market makers. The game therefore endogenizes both demand and supply of li
 quidity. The closed-form solution yields several insights. First\, stealth
  trading is both privately and socially costly because market makers incur
  additional cost not knowing when execution ends. Second\, the presence of
  a large seller does not unambiguously benefit other participants. Market 
 makers benefit only if there is enough risk-absorption capacity or if the 
 execution period is short. Other investors benefit only when the seller se
 lls at high enough intensity.
LOCATION: TBC
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