Insider trading under discreteness

Scotti, M

Insider trading under discreteness

Scotti, M

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Publication Type:: Journal Article
Citation:: International Journal of Theoretical and Applied Finance, 2011, 14 (5), pp. 757 - 771
Issue Date:: 2011-08-01

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Field	Value	Language
dc.contributor.author	Scotti, M https://orcid.org/0000-0002-1179-6521	en_US
dc.date.issued	2011-08-01	en_US
dc.identifier.citation	International Journal of Theoretical and Applied Finance, 2011, 14 (5), pp. 757 - 771	en_US
dc.identifier.issn	0219-0249	en_US
dc.identifier.uri	http://hdl.handle.net/10453/17346
dc.description.abstract	This paper analyzes a version of the static Kyle's (1985) model of insider trading where both the distribution of the liquidation value of the risky asset and the distribution of the order flow of noise traders are discrete. We derive necessary and sufficient conditions for the existence of perfect Bayesian equilibria where the insider's strategy is increasing in the value of the asset, and show that such equilibria can be constructed if and only if the variance of the asset is not too extreme. The results in this paper are relevant in contexts where a discrete version of the static Kyle's (1985) model might be a convenient modelling choice. © 2011 World Scientific Publishing Company.	en_US
dc.relation.ispartof	International Journal of Theoretical and Applied Finance	en_US
dc.relation.isbasedon	10.1142/S0219024911006528	en_US
dc.subject.classification	Finance	en_US
dc.title	Insider trading under discreteness	en_US
dc.type	Journal Article
utslib.citation.volume	5	en_US
utslib.citation.volume	14	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	01 Mathematical Sciences	en_US
utslib.for	15 Commerce, Management, Tourism and Services	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	closed_access
pubs.issue	5	en_US
pubs.publication-status	Published	en_US
pubs.volume	14	en_US

Abstract:

This paper analyzes a version of the static Kyle's (1985) model of insider trading where both the distribution of the liquidation value of the risky asset and the distribution of the order flow of noise traders are discrete. We derive necessary and sufficient conditions for the existence of perfect Bayesian equilibria where the insider's strategy is increasing in the value of the asset, and show that such equilibria can be constructed if and only if the variance of the asset is not too extreme. The results in this paper are relevant in contexts where a discrete version of the static Kyle's (1985) model might be a convenient modelling choice. © 2011 World Scientific Publishing Company.

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http://hdl.handle.net/10453/17346