Path-dependent Kyle equilibrium model
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arXiv
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| Format: | Preprint |
| Published: |
2020
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| _version_ | 1866914079767003136 |
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| author | Corcuera, José M. Di Nunno, Giulia |
| author_facet | Corcuera, José M. Di Nunno, Giulia |
| contents | We consider an auction type equilibrium model with an insider in line with the one originally introduced by Kyle in 1985 and then extended to the continuous time setting by Back in 1992. The novelty introduced with this paper is that we deal with a general price functional depending on the whole past of the aggregate demand, i.e. we work with path-dependency. By using the functional Itô calculus, we provide necessary and sufficient conditions for the existence of an equilibrium. Furthermore, we consider both the cases of a risk-neutral and a risk-averse insider. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2006_06395 |
| institution | arXiv |
| publishDate | 2020 |
| record_format | arxiv |
| spellingShingle | Path-dependent Kyle equilibrium model Corcuera, José M. Di Nunno, Giulia Trading and Market Microstructure Mathematical Finance 60G35, 62M20, 91B50, 93E03 We consider an auction type equilibrium model with an insider in line with the one originally introduced by Kyle in 1985 and then extended to the continuous time setting by Back in 1992. The novelty introduced with this paper is that we deal with a general price functional depending on the whole past of the aggregate demand, i.e. we work with path-dependency. By using the functional Itô calculus, we provide necessary and sufficient conditions for the existence of an equilibrium. Furthermore, we consider both the cases of a risk-neutral and a risk-averse insider. |
| title | Path-dependent Kyle equilibrium model |
| topic | Trading and Market Microstructure Mathematical Finance 60G35, 62M20, 91B50, 93E03 |
| url | https://arxiv.org/abs/2006.06395 |