ABSTRACT This paper develops and simulates a model of a Bayesian market maker who transacts with noise and position traders in derivative markets. The impact of noise trading is examined relative to price determination in FX futures, noise transmission from futures to options, and...

ABSTRACT This paper develops and simulates a model of a Bayesian market maker who transacts with noise and position traders in derivative markets. The impact of noise trading is examined relative to price determination in FX futures, noise transmission from futures to options, and...

The above article (DOI: <DOI HREF="10.1002/ijfe.373">10.1002|ijfe.373</DOI>) was published online in Early View on 25 July 2008. <P>On page 1 of the initial online publication of this article, the third author's surname was incorrectly spelled. The correct spelling should be: KAREN HOVSEPIAN.

This paper develops and simulates a model of a Bayesian market maker who transacts with noise and position traders in derivative markets. The impact of noise trading is examined relative to price determination in FX futures, noise transmission from futures to options, and risk-management...