Volume 11, February 2007Special Issue: "Stochastic analysis and mathematical finance" in honor of Nicole El Karoui's 60th birthday
|Page(s)||80 - 88|
|Published online||01 March 2007|
Pricing rules under asymmetric information
Department of Mathematical Sciences Ritsumeikan University, Kusatsu, Shiga, 525-8577 Japan; firstname.lastname@example.org
2 U.M.R. CNRS C 5583, Laboratoire de statistique et probabilités, Université Paul Sabatier, 118 route de Narbonne, 31062 Toulouse Cedex 04, France; email@example.com
Accepted: September 2005
We consider an extension of the Kyle and Back's model [Back, Rev. Finance Stud. 5 (1992) 387–409; Kyle, Econometrica 35 (1985) 1315–1335], meaning a model for the market with a continuous time risky asset and asymmetrical information. There are three financial agents: the market maker, an insider trader (who knows a random variable V which will be revealed at final time) and a non informed agent. Here we assume that the non informed agent is strategic, namely he/she uses a utility function to optimize his/her strategy. Optimal control theory is applied to obtain a pricing rule and to prove the existence of an equilibrium price when the insider trader and the non informed agent are risk-neutral. We will show that if such an equilibrium exists, then the non informed agent's optimal strategy is to do nothing, in other words to be non strategic.
Mathematics Subject Classification: 49N30 / 60H10 / 93E20
Key words: Equilibrium / optimal control / asymmetric information.
© EDP Sciences, SMAI, 2007
Current usage metrics show cumulative count of Article Views (full-text article views including HTML views, PDF and ePub downloads, according to the available data) and Abstracts Views on Vision4Press platform.
Data correspond to usage on the plateform after 2015. The current usage metrics is available 48-96 hours after online publication and is updated daily on week days.
Initial download of the metrics may take a while.