Glosten-Milgrom Model

> CONFIGURATION

[PARAM]

High Value (vH)

Asset value if the true state is High.

Low Value (vL)

Asset value if the true state is Low.

True State

The actual fundamental value of the asset (hidden from MM).

High (H)

Prior P(H)

Initial probability belief that the true value is High.

0.50

Informed_Traders (α)

Proportion of traders who know the true value.

0.30

Informed_Accuracy (ρ)

Probability that an informed trader signals correctly.

0.80

Sim_Steps

Number of sequential trades to simulate.

Random_Seed

Seed for reproducible random number generation.

/ PROCESSING_ORDERS...

Model Context: The Glosten-Milgrom model simulates the evolution of spreads in a sequential trade market. The Market Maker sets Bid/Ask quotes to account for adverse selection risk from Informed Traders (α). As trades occur, the MM updates their belief about the True Value (vH or vL) via Bayesian inference.

Awaiting Configuration

> Configure GM parameters on left sidebar
> Click RUN_SIMULATION to initiate order flow