Liquidity modelling
Assume that there is some ordering costc. In this case
J(S)=cS+hE
(S D)+
+pE
(D S)+
.
Calculating the derivative
c+hF(S) p( 1 F(S))= 0.
Solving the equation
c p+F(S)(h+p)= 0 , F(S)=pp +ch.
Assume that there is some ordering costc. In this case
J(S)=cS+hE
+pE
Calculating the derivative
c+hF(S) p( 1 F(S))= 0.
Solving the equation
c p+F(S)(h+p)= 0 , F(S)=pp +ch.