Could anyone suggest some literature or have any practical advice for marking a market in thinly traded assets with the following characteristics:
- 0-10 trades per day.
- Open limit-order book with 0-5 resting orders.
- Almost no correlation with more liquid assets
- Relatively high volatility.
- Small number of market participants.
- Very wide spreads that will hopefully make the risk worthwhile.
I am most interested in price discovery. How should I best use the limited information available and how should I protect myself against predatory traders who may take advantage of my algorithms by moving the market?