Related papers: Information-Based Trading
We use standard physics techniques to model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties…
This paper introduces an information-based model for the pricing of storable commodities such as crude oil and natural gas. The model uses the concept of market information about future supply and demand as a basis for valuation. Physical…
We show that under mild assumptions, the total value of information to informed traders in the market can be measured by the covariance between price changes and order flow. This covariance captures noise trader losses, which equal informed…
We study a setting where Bayesian agents with a common prior have private information related to an event's outcome and sequentially make public announcements relating to their information. Our main result shows that when agents' private…
We consider a model of oligopolistic competition in a market with search frictions, in which competing firms with products of unknown quality advertise how much information a consumer's visit will glean. In the unique symmetric equilibrium…
We consider the fundamental scenario where a single item is to be sold to one of two agents. Both agents draw their valuation for the item from the same probability distribution. However, only one of them submits a bid to the mechanism. The…
A market with asymmetric information can be viewed as a repeated exchange game between the informed sector and the uninformed one. In a market with risk-neutral agents, De Meyer [2010] proves that the price process should be a particular…
Welfare maximization in bilateral trade has been extensively studied in recent years. Previous literature obtained incentive-compatible approximation mechanisms only for the private values case. In this paper, we study welfare maximization…
In this paper we extend the theory of option pricing to take into account and explain the empirical evidence for asset prices such as non-Gaussian returns, long-range dependence, volatility clustering, non-Gaussian copula dependence, as…
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…
A competitive market is modeled as a game of incomplete information. One player observes some payoff-relevant state and can sell (possibly noisy) messages thereof to the other, whose willingness to pay is contingent on their own beliefs. We…
We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of…
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…
The main purpose of this paper is to extend the information-based asset-pricing framework of Brody-Hughston-Macrina to a more general set-up. We include a wider class of models for market information and in contrast to the original paper,…
We introduce and analyze a variation of the Bertrand game in which the revenue is shared between two players. This game models situations in which one economic agent can provide goods/services to consumers either directly or through an…
We investigate activities that have different periods of duration. We define the profit intensity as a measure of this economic category. The profit intensity in a repeated trading has a unique property of attaining its maximum at a fixed…
Classic results show that even an arbitrarily small correlation across bidders' information can enable full surplus extraction in auctions and related mechanism design settings. Motivated by this fragility, we study the information…
An attempt to obtain market directional information from non-stationary solution of the dynamic equation: "future price tends to the value maximizing the number of shares traded per unit time" is presented. A remarkable feature of the…
I construct a novel random double auction as a robust bilateral trading mechanism for a profit-maximizing intermediary who facilitates trade between a buyer and a seller. It works as follows. The intermediary publicly commits to charging a…
Involving effects of media, opinion leader and other agents on the opinion of individuals of market society, a trader based model is developed and utilized to simulate price via supply and demand. Pronounced effects are considered with…