Título: Kyle-Back Model with Dynamic Public Signal: Basic Model and Applications
Ciclo de Palestras do PPGE - 2025
Palestrante: Eduardo Ferioli Gomes (UFF)
Data: 11/06
Duração: 15:30
Local: I-044-B
Laboratório de Sistemas Estocásticos (LSE)
Centro de Tecnologia (CT) - UFRJ
Resumo:
We developed a basic framework that is version of the Kyle-Back modified to include a public signal As usual in the literature, the insider receives a private signal that in our case may be either static, when the insider knows the value of the asset throughout the trading period, or dynamic, when they receive a signal that converges to the final value of the asset. The public signal, that is a Markov Bridge converging to the same condition as the private signal, is observed by both the insider and the market maker that use that information to form their respective valuations. We show the existence of equilibrium in this model and explore the characteristics of it.
Furthermore, in this talk we present the ongoing developments of this research agenda considering two applications that use the mentioned model as framework. The first one is regarding Market Fragmentation where the public signal is the shadow price of an asset and the private signal is obtained by an insider that is a high-frequency trader that is able to operate in possibly highly correlated markets. The second application is regarding the possibility of competing insiders. Now the public signal is also a shadow price, but we consider a setting with many insiders each one with a different information flow and their interaction forms the price process.
This is a joint work with Umut Çetin (LSE).
