
LMSR trading vs. CDA trading
LMSR trading vs. CDA trading
The Great Michael Giberson:
In a manner of speaking, I guess you could say that when LMSR traders agree on prices they don't trade, and when they disagree, they do trade. But this doesn't differ too much, in terms of the market point of view, from CDA.
While CDA traders explicitly agree on a price to trade [...]
Author: Chris. F. Masse
Category: All Best Posts Ever Mechanism Designs
Publish Date: Fri, 26 Oct 2007 12:58:11 +0000
The Great Michael Giberson:
Quote:
In a manner of speaking, I guess you could say that when LMSR traders agree on prices they don't trade, and when they disagree, they do trade. But this doesn't differ too much, in terms of the market point of view, from CDA.
While CDA traders explicitly agree on a price to trade at, in some sense the agreement on a price to trade reflects an underlying disagreement. The buyer thinks the price is lower than the event probability and the seller thinks the price is higher than the event probability. Once everyone agrees, trading stops.
So, too, you could say that when CDA traders agree they don't trade, and when they disagree, they do trade.
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