Related papers: Insider Trading with Temporary Price Impact
We propose a non-linear observation-driven version of the Hasbrouck (1991) model for dynamically estimating trades' market impact and information content. We find that market impact displays an intraday pattern superimposed with large…
This paper studies Markov perfect equilibria in a repeated duopoly model where sellers choose algorithms. An algorithm is a mapping from the competitor's price to own price. Once set, algorithms respond quickly. Customers arrive randomly…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
We investigate the effects of the social interactions of a finite set of agents on an equilibrium pricing mechanism. A derivative written on non-tradable underlyings is introduced to the market and priced in an equilibrium framework by…
Linear Fisher market is one of the most fundamental economic models. The market is traditionally examined on the basis of individual's price-taking behavior. However, this assumption breaks in markets such as online advertising and…
We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…
In this paper, the Kyle model of insider trading is extended by characterizing the trading volume with long memory and allowing the noise trading volatility to follow a general stochastic process. Under this newly revised model, the…
Considering that a trader or a trading algorithm interacting with markets during continuous auctions can be modeled by an iterating procedure adjusting the price at which he posts orders at a given rhythm, this paper proposes a procedure…
We study a dynamic market setting where an intermediary interacts with an unknown large sequence of agents that can be either sellers or buyers: their identities, as well as the sequence length $n$, are decided in an adversarial, online…
We initiate the study of markets for private data, though the lens of differential privacy. Although the purchase and sale of private data has already begun on a large scale, a theory of privacy as a commodity is missing. In this paper, we…
Equity auctions display several distinctive characteristics in contrast to continuous trading. As the auction time approaches, the rate of events accelerates causing a substantial liquidity buildup around the indicative price. This, in…
We study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…
The computation of equilibrium prices at which the supply of goods matches their demand typically relies on complete information on agents' private attributes, e.g., suppliers' cost functions, which are often unavailable in practice.…
We consider the problem of maximizing portfolio value when an agent has a subjective view on asset value which differs from the traded market price. The agent's trades will have a price impact which affect the price at which the asset is…
We examine the dynamics of informational efficiency in a market with asymmetrically informed, boundedly rational traders who adaptively learn optimal strategies using simple multiarmed bandit (MAB) algorithms. The strategies available to…
We study in detail and explicitly solve the version of Kyle's model introduced in a specific case in \cite{BB}, where the trading horizon is given by an exponentially distributed random time. The first part of the paper is devoted to the…
High-stakes auctions are often preceded by nonbinding communication between bidders and the seller. Motivated by these practices, this paper examines a two-period model in which two bidders send private cheap talk messages to the seller…
We study equilibrium investment into bidding and latency reduction for different sequencing policies. For a batch auction design, we observe that bidders shade bids according to the likelihood that competing bidders land in the current…
Classical Kyle-type models of informed trading typically treat noise trader demand as purely exogenous. In reality, many market participants react to price movements and news, generating feedback effects that can significantly alter market…
We study an information acquisition problem in which an informed trader acquires costly information prior to trading in the Kyle equilibrium. The cost of information acquisition is represented by an entropy cost. Regardless of the prior…