Related papers: A Stationary Kyle Setup: Microfounding propagator …
In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium…
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…
We model an informed agent with information about the future value of an asset trying to maximize profits when subjected to a transaction cost as well as a market maker tasked with setting fair transaction prices. In a single auction model,…
In this paper we study the Kyle-Back strategic insider trading equilibrium model in which the insider has an instantaneous information on an asset, assumed to follow an Ornstein-Uhlenback-type dynamics that allows possible influence by the…
Starting from a basic model in which the dynamic of the transaction prices is a geometric Brownian motion disrupted by a microstructure white noise, corresponding to the random alternation of bids and asks, we propose moment-based…
When reasoning about strategic behavior in a machine learning context it is tempting to combine standard microfoundations of rational agents with the statistical decision theory underlying classification. In this work, we argue that a…
We introduce a simple model for addressing the controversy in the study of financial systems, sometimes taken as brownian-like processes and other as critical systems with fluctuations of arbitrary magnitude. The model considers a…
In this paper, a mathematically rigorous solution overturns existing wisdom regarding New Keynesian Dynamic Stochastic General Equilibrium. I develop a formal concept of stochastic equilibrium. I prove uniqueness and necessity, when agents…
We present a methodology for representing probabilistic relationships in a general-equilibrium economic model. Specifically, we define a precise mapping from a Bayesian network with binary nodes to a market price system where consumers and…
The paper tests the validity of the critique of the fiscal theory of the price level. A stochastic general equilibrium model with continuous time is constructed. An active fiscal policy and a passive monetary policy have been set. Monetary…
In the dynamic discrete-time trading setting of Kyle (1985), we prove that Kyle's equilibrium model is stable when there are one or two trading times. For three or more trading times, we prove that Kyle's equilibrium is not stable. These…
We present a novel microscopic stock market model consisting of a large number of random agents modeling traders in a market. Each agent is characterized by a set of parameters that serve to make iterated predictions of two successive…
We solve a generalized Kyle model type problem using Monge-Kantorovich duality and backward stochastic partial differential equations. First, we show that the the generalized Kyle model with dynamic information can be recast into a terminal…
Stationary non-equilibrium states describe steady flows through macroscopic systems. Although they represent the simplest generalization of equilibrium states, they exhibit a variety of new phenomena. Within a statistical mechanics…
We propose a continuous-time model of trading with heterogeneous beliefs. Risk-neutral agents face quadratic costs-of-carry on positions and thus their marginal valuations decrease with the size of their position, as it would be the case…
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 present a Markovian market model driven by a hidden Brownian efficient price. In particular, we extend the queue-reactive model, making its dynamics dependent on the efficient price. Our study focuses on two sub-models: a signal-driven…
A general information equilibrium model in the case of ideal information transfer is defined and then used to derive the relationship between supply (information destination) and demand (information source) with the price as the detector of…
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…
Kyle (1985) builds a pioneering and influential model, in which an insider with long-lived private information submits an optimal order in each period given the market maker's pricing rule. An inconsistency exists to some extent in the…