Related papers: A Generalized Kyle-Back Strategic Insider Trading …
We consider in discrete time, a general class of sequential stochastic dynamic games with asymmetric information with the following features. The underlying system has Markovian dynamics controlled by the agents' joint actions. Each agent's…
In an incomplete market underpinned by the trinomial model, we consider two investors : an ordinary agent whose decisions are driven by public information and an insider who possesses from the beginning a surplus of information encoded…
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 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,…
We study price discovery in a model where an informed agent has arbitrary private information about state probabilities and trades state-contingent claims. The model unifies the key elements of Arrow-Debreu (1954) and Kyle (1985). When the…
We propose a flexible stochastic framework for modeling the market share dynamics over time in a multiple markets setting, where firms interact within and between markets. Firms undergo stochastic idiosyncratic shocks, which contract their…
The stochastic knapsack has been used as a model in wide ranging applications from dynamic resource allocation to admission control in telecommunication. In recent years, a variation of the model has become a basic tool in studying problems…
We study risk-sharing equilibria with general convex costs on the agents' trading rates. For an infinite-horizon model with linear state dynamics and exogenous volatilities, we prove that the equilibrium returns mean-revert around their…
We compare the predictions of the stationary Kyle model, a microfounded multi-step linear price impact model in which market prices forecast fundamentals through information encoded in the order flow, with those of the propagator model, a…
This paper studies the pricing problem in which the underlying asset follows a non-Markovian stochastic volatility model. Classical partial differential equation methods face significant challenges in this context, as the option prices…
We derive closed-form solutions to the optimal stopping problems related to the pricing of perpetual American standard and lookback put and call options in the extensions of the Black-Merton-Scholes model with progressively enlarged…
This paper develops a comprehensive theoretical framework that imports concepts from stochastic thermodynamics to model price impact and characterize the feasibility of round-trip arbitrage in financial markets. A trading cycle is treated…
We generalise the description of the dynamics of the order book of financial markets in terms of a Brownian particle embedded in a fluid of incoming, exiting and annihilating particles by presenting a model of the velocity on each side (buy…
This paper examines a trade execution game for two large traders in a generalized price impact model. We incorporate a stochastic and sequentially dependent factor that exogenously affects the market price into financial markets. Our model…
We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…
Privacy-preserving cryptocurrency exchanges (shielded AMMs, batched swap auctions, sealed-bid order-flow auctions) alter what the pricing mechanism observes about order flow. We derive the unique linear Kyle equilibrium when a committed…
We study data-driven learning of robust stochastic control for infinite-horizon systems with potentially continuous state and action spaces. In many managerial settings--supply chains, finance, manufacturing, services, and dynamic…
Motivated by applications in economics and finance, in particular to the modeling of limit order books, we study a class of stochastic second-order PDEs with non-linear Stefan-type boundary interaction. To solve the equation we transform…
We propose a new financial model, the stochastic volatility model with sticky drawdown and drawup processes (SVSDU model), which enables us to capture the features of winning and losing streaks that are common across financial markets but…
The paper studies derivative asset analysis in structural credit risk models where the asset value of the firm is not fully observable. It is shown that in order to compute the price dynamics of traded securities one needs to solve a…