Appendix 2 Proof of Proposition 2 | RDP 8707: Asymmetric Information and Bid-Ask Spreads in the Eurocurrency Markets

RDP 8707: Asymmetric Information and Bid-Ask Spreads in the Eurocurrency Markets Appendix 2 Proof of Proposition 2

Malcolm L. Edey

October 1987

Equilibrium is defined by	h - Rg(h)
	k – hσ.

Let R – where c ≡

We wish to sign the derivatives of k with respect to and c.

Then are also negative from the definition of c