Related papers: Kyle's Model with Stochastic Liquidity
In quantitative finance, we often model asset prices as a noisy Ito semimartingale. As this model is not identifiable, approximating by a time-changed Levy process can be useful for generative modelling. We give a new estimate of the…
We present an empirical study of the subordination hypothesis for a stochastic time series of a stock price. The fluctuating rate of trading is identified with the stochastic variance of the stock price, as in the continuous-time random…
We establish connections between optimal transport theory and the dynamic version of the Kyle model, including new characterizations of informed trading profits via conjugate duality and Monge-Kantorovich duality. We use these connections…
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…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…
This paper studies a Kyle-Back model with a risk-averse insider possessing exponential utility and a dynamic stochastic signal about the asset's terminal fundamental value. While the existing literature considers either risk-neutral…
We investigate the general problem of how to model the kinematics of stock prices without considering the dynamical causes of motion. We propose a stochastic process with long-range correlated absolute returns. We find that the model is…
The Kyle model describes how an equilibrium of order sizes and security prices naturally arises between a trader with insider information and the price providing market maker as they interact through a series of auctions. Ever since being…
A general formalism is developed to construct a Markov chain model that converges to a one-dimensional map in the infinite population limit. Stochastic fluctuations are therefore internal to the system and not externally specified. For…
We formulate a discrete-time Bayesian stochastic volatility model for high-frequency stock-market data that directly accounts for microstructure noise, and outline a Markov chain Monte Carlo algorithm for parameter estimation. The methods…
Using available data from the New York stock market (NYSM) we test four different bi-parametric models to fit the correspondent volume-price distributions at each $10$-minute lag: the Gamma distribution, the inverse Gamma distribution, the…
We introduce a Hawkes-like process and study its scaling limit as the system becomes increasingly endogenous. We derive functional limit theorems for intensity and fluctuations. Then, we introduce a high-frequency model for a price of a…
This study presents contemporaneous modeling of asset return and price range within the framework of stochastic volatility with leverage. A new representation of the probability density function for the price range is provided, and its…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…
Standard quantitative models of the stock market predict a log-normal distribution for stock returns (Bachelier 1900, Osborne 1959), but it is recognised (Fama 1965) that empirical data, in comparison with a Gaussian, exhibit leptokurtosis…
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…
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
This paper studies the Glosten Milgrom model whose risky asset value admits an arbitrary discrete distribution. Contrast to existing results on insider's models, the insider's optimal strategy in this model, if exists, is not of feedback…
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…
A simple Hawkes model have been developed for the price tick structure dynamics incorporating market microstructure noise and trade clustering. In this paper, the model is extended with random mark to deal with more realistic price tick…