Solvability of the Gaussian Kyle model with imperfect information and risk aversion
Trading and Market Microstructure
2025-01-29 v1 Probability
Mathematical Finance
Abstract
We investigate a Kyle model under Gaussian assumptions where a risk-averse informed trader has imperfect information on the fundamental price of an asset. We show that an equilibrium can be constructed by considering an optimal transport problem that is solved under a measure that renders the utility of the informed trader martingale and a filtering problem under the historical measure.
Keywords
Cite
@article{arxiv.2501.16488,
title = {Solvability of the Gaussian Kyle model with imperfect information and risk aversion},
author = {Reda Chhaibi and Ibrahim Ekren and Eunjung Noh},
journal= {arXiv preprint arXiv:2501.16488},
year = {2025}
}