Question: Consider a sequential trade model in which a security has an uncertain value. The value V of the security can either b $150 or $250
Consider a sequential trade model in which a security has an uncertain value. The value V of the security can either b $150 or $250 with equal probability. The pro traders is 60%. As usual, liquidity traders buy or sell with equal probability whereas informed traders only buy when they know the security price is high, and sell when they know the security price is low. The probability that V- $250, conditional that the first trade is a sell, is: portion of informed traders is 40%, whereas the proportion of liquidity a. PN-250 | Sell] 0.2 b. P[V 250.| Sell)-0.3 c. PN-250 | Sell)-0.5 d. p[y 250| Sell)-0.7 e P[V 250 Sell)-0.8 f None of the above
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