Mathematics for Economists

(Greg DeLong) #1

Liquidity modelling


Assume that there is some ordering costc. In this case

J(S)=cS+hE




(SD)+





+pE




(DS)+





.


Calculating the derivative

c+hF(S)p( 1 F(S))= 0.

Solving the equation

cp+F(S)(h+p)= 0 , F(S)=pp+ch.
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