Ping Liu
Portrait of Ping Liu

Ping Liu

Assistant Professor of Finance

Mitch Daniels School of Business, Purdue University

Research
Corporate finance, contract theory, information economics, market design, automated market making, prediction markets, blockchain and FinTech
Curriculum vitae (PDF)

Latest Research Highlights

  1. Prediction Markets as Data Marketplaces: The Price of Information under Automated Market Making

    With Zhan Pang

    A prediction market can be viewed as a crowdsourced data marketplace: traders supply information through their trades, and the prices they produce serve as forecasts for data users. Under the logarithmic market scoring rule, a trader's expected profit equals the market maker's liquidity times the reduction in the forecast's expected log-loss, so liquidity is the price paid per unit of information. As the sole buyer, the market maker sets that price below its marginal valuation of accuracy and opens the market only when this valuation covers the full cost per unit of information.

  2. Rational Expectations Equilibrium with an Automated Market Maker

    With Zhan Pang

    In a Grossman–Stiglitz equilibrium with costly information acquisition, an automated market maker's liquidity affects price informativeness only through how many traders choose to become informed. Deeper liquidity draws more of them in, at the market maker's expense: it earns an expected profit in a shallow market and bears an expected loss in a deep one.

  3. Automated Market Making and Liquidity Provision in Prediction Markets

    With Zhan Pang

    Under the logarithmic market scoring rule, liquidity is what the market maker pays, in expectation, for each unit of uncertainty a trade resolves. As the sole buyer of information, the market maker prices like a monopsonist and sets liquidity below the value it places on accuracy.

  4. Put Credit Rating Agency's Money Where Its Mouth Is

    With Zhan Pang and Alexei Tchistyi

    Revise and Resubmit, Management Science

    The optimal contract for a rating agency that must both learn a bond's quality and report it truthfully involves no direct payment; instead, the agency is given the opportunity to profit from its own knowledge and earns only when its rating proves accurate. A chooser option on credit default swaps, mediated by a clearinghouse, implements the contract.

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