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Insider Trading in Continuous Time

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Author Info
Back, Kerry
Abstract

The continuous-time version of A. Kyle's (1985) model of asset pricing with asymmetric information is studied. It is shown that there is a unique equilibrium pricing rule within a certain class. This pricing rule is obtained in closed form for general distributions of the asset value. A particular example is a lognormal distribution, for which the equilibrium price process is a geometric Brownian motion. General trading strategies are allowed. In equilibrium, the informed agent, who is risk neutral, has many optima, but he does not correlate his trades locally with the noise trades nor does he submit discrete orders. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

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File URL: http://www.jstor.org/fcgi-bin/jstor/listjournal.fcg/08939454
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Publisher Info
Article provided by Oxford University Press for Society for Financial Studies in its journal Review of Financial Studies.

Volume (Year): 5 (1992)
Issue (Month): 3 ()
Pages: 387-409
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:oup:rfinst:v:5:y:1992:i:3:p:387-409

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  1. Geir Hoidal Bjonnes & Dagfinn Rime, 2003. "Dealer Behavior and Trading Systems in Foreign Exchange Markets," Working Paper 2003/10, Norges Bank. [Downloadable!]
    Other versions:
  2. Vathana Ly Vath & Mohamed Mnif & Huyên Pham, 2007. "A model of optimal portfolio selection under liquidity risk and price impact," Finance and Stochastics, Springer, vol. 11(1), pages 51-90, January. [Downloadable!] (restricted)
  3. Kerry Back & Hal Pedersen, 1995. "Long-Lived Information and Intraday Patterns," Finance 9507008, EconWPA. [Downloadable!]
  4. Alexis Derviz, 2003. "Components of the Czech Koruna Risk Premium in a Multiple-Dealer FX Market," Working Papers 2003/04, Czech National Bank, Research Department. [Downloadable!]
  5. P. Bank & D. Baum, . "Hedging and Portfolio Optimization in Illiquid Financial Markets," Sonderforschungsbereich 373 2002-53, Humboldt Universitaet Berlin.
  6. 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. [Downloadable!] (restricted)
  7. P. Imkeller, . "Random times at which insiders can have free lunches," Sonderforschungsbereich 373 2001-62, Humboldt Universitaet Berlin.
  8. Saikat Nandi, 1995. "Asymmetric information about volatility and option markets," Working Paper 95-19, Federal Reserve Bank of Atlanta. [Downloadable!]
  9. Charles M. Jones & Owen Lamont & Robin Lumsdaine, 1996. "Public Information and the Persistence of Bond Market Volatility," NBER Working Papers 5446, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Georg Nöldeke & Thomas Tröger, 2001. "Existence of Linear Equilibria in the Kyle Model with Multiple Informed Traders," Bonn Econ Discussion Papers bgse1_2001, University of Bonn, Germany. [Downloadable!]
    Other versions:
  11. Roberto Monte & Barbara Trivellato, 2009. "An equilibrium model of insider trading in continuous time," Decisions in Economics and Finance, Springer, vol. 32(2), pages 83-128, November. [Downloadable!] (restricted)
  12. José Mª Corcuera & Peter Imkeller & Arturo Kohatsu & David Nualart, 2003. "Additional Utility of Insiders with Imperfect Dynamical Information," Economics Working Papers 675, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  13. P. Imkeller, . "Malliavin's calculus in insider models: additional utility and free lunches," Sonderforschungsbereich 373 2002-14, Humboldt Universitaet Berlin.
  14. Kyung-Ha Cho & Nicole El Karoui, 2000. "Insider Trading and Nonlinear Equilibria: Single Auction Case," Annales d'Economie et de Statistique, ADRES, issue 60, pages 03, Octobre-D. [Downloadable!]
  15. Kerry Back & Hal Pedersen, 1995. "Long-Lived Information and Intraday Patterns," Finance 9507009, EconWPA. [Downloadable!]
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