Strategic Insider Trading in Continuous Time: A New Approach

dc.contributor.author	Aase, Knut K.
dc.contributor.author	Øksendal, Bernt
dc.date.accessioned	2019-08-29T10:25:13Z
dc.date.available	2019-08-29T10:25:13Z
dc.date.issued	2019-08-29
dc.identifier.issn	1500-4066
dc.identifier.uri	http://hdl.handle.net/11250/2611571
dc.description.abstract	The continuous-time version of Kyle's (1985) model of asset pricing with asymmetric information is studied, and generalized by allowing time-varying noise trading. From rather simple assumptions we are able to derive the optimal trade for an insider; the trading intensity satisfies a deterministic integral equation, given perfect inside information, which we give a closed form solution to. We use a new technique called forward integration in order to find the optimal trading strategy. This is an extension of the stochastic integral which takes account of the informational asymmetry inherent in this problem. The market makers' price response is found by the use of filtering theory. The novelty is our approach, which could be extended in scope.	nb_NO
dc.language.iso	eng	nb_NO
dc.publisher	FOR	nb_NO
dc.relation.ispartofseries	Discussion paper;3/19
dc.subject	Insider trading	nb_NO
dc.subject	asymmetric information	nb_NO
dc.subject	strategic trade	nb_NO
dc.subject	filtering theory	nb_NO
dc.subject	forward integration	nb_NO
dc.title	Strategic Insider Trading in Continuous Time: A New Approach	nb_NO
dc.type	Working paper	nb_NO
dc.source.pagenumber	29	nb_NO