We study price formation in securities markets, using the sequential trade framework of Glosten and Milgrom [7]. This paper makes one basic methodological advance over previous research on sequential securities trading: we allow traders to choose from n trade sizes in a multi-period market,...

This paper links real investment policy to corporate risk management, endogenizing the costs of external financing. Previous literature finds investment efficiency linked to full hedging. In this model, a firm with proprietary information when deciding its investment in a valuable project, may...