Dynamic Exchange price quoting?

Question

If listed bond/equity prices are objectively determined by demand/
supply dynamics.Then the EXchange determines the dynamic pricing of these(hence to quote dynamically).What math models are used by the eXchange/Quote provider & how does the system (IT)architecture reflect this dynamics true to reality.How can/is this verified usually.Is the formulae/methodology used for pricing transparently & can be independently computed ? WIl appreciate in the context of NYSE/NASDAQ/AMEX & NSE+BSE in Indian context.

Answer 1

The Dynamic is merely continuous updating of prices. Prices are not controlled or set by the exchange. The exchange is merely quoting the Bid/Ask and prices at which the underlying traded.

I'm no bond trader, but I've traded just about everything else in the past 15 years, and I'm not sure what you're asking. Are you talking about derivatives, like options and futures on bonds? Those use the Black/Scholes model, or something similar.

You have correctly stated that price is determined by supply and demand. But then you say "the Exchange determines prices." Both cannot be true, and the latter is false. So what are you asking?

You might want to re-post this question in clearer terms.