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Optimal Insider Strategy with Law Penalties

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  • Fajardo, Jose

Abstract

We study the optimal continuous trading strategy of an insider whois subject to the possibility of law penalties due to her illegaltrading activity. Also, we discuss how to obtain the optimal penaltyrule in order to maximize a welfare function.

Suggested Citation

  • Fajardo, Jose, 2016. "Optimal Insider Strategy with Law Penalties," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 70(1), March.
    • Handle: RePEc:fgv:epgrbe:v:70:y:2016:i:1:a:48324
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    References listed on IDEAS

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    1. Utpal Bhattacharya & Hazem Daouk, 2002. "The World Price of Insider Trading," Journal of Finance, American Finance Association, vol. 57(1), pages 75-108, February.
    2. Luciano Campi & Umut Çetin, 2007. "Insider trading in an equilibrium model with default: a passage from reduced-form to structural modelling," Finance and Stochastics, Springer, vol. 11(4), pages 591-602, October.
    3. Acharya, Viral V. & Johnson, Timothy C., 2010. "More insiders, more insider trading: Evidence from private-equity buyouts," Journal of Financial Economics, Elsevier, vol. 98(3), pages 500-523, December.
    4. Acharya, Viral V. & Johnson, Timothy C., 2007. "Insider trading in credit derivatives," Journal of Financial Economics, Elsevier, vol. 84(1), pages 110-141, April.
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