Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)

First Advisor

Melvin Jameson


The dissertation is composed of three related essays on the microstructure of financial markets. The first extends the work of Glosten and Milgrom (23) by examining prices in a market where dealers are heterogeneous and information is distributed asymmetrically across market participants. The second essay is an examination of some of the special pricing problems faced by dealers in the options market. Particular attention is given to the consequences of instantaneously perfect correlation in the expected returns of options on the same underlying equity. This relation is shown to imply a systematic relation among the bid-ask spreads for such options as well as having consequences for the inferrence of bid-ask spreads from transaction prices. Each of these implications is subjected to empirical investigation. The final essay is an attempt to apply a model of dealer pricing in an empirical analysis of the mechanism by which information is incorporated in market prices. At this point, the results are best viewed as preliminary and indicative of the relative immaturity of this segment of the literature.