创业与管理学院知识库

I develop a sequential trading model with ambiguity-averse market makers and provide a theoretical explanation to the historical coincidence of ambiguous events, asset illiquidity, and price variability. My model implies that the bid-ask spread of an asset contains an ad-ditive component of ambiguity premium. As a result, higher ambiguity generally leads to lower asset liquidity. More interestingly, asset prices are variable under particular condi-tions: specifically, only mixed-strategy equilibria exist, such that market makers probabilis-tically set multiple prices. Further analysis confirms that, compared with risk, ambiguity plays a unique role in explaining price variability. (c) 2021 Elsevier B.V. All rights reserved.