An Infinite-Dimensional Insider Trading Game

Christian Keller and Michael C. Tseng

Papers from arXiv.org

Abstract: We generalize the seminal framework of Kyle (1985) to a many-asset setting, bridging the gap between informed-trading theory and modern trading practices. Specifically, we formulate an infinite-dimensional Bayesian trading game in which the informed trader's private information may concern arbitrary aspects of the cross-sectional payoff structure across a continuum of traded assets. In this general setting, we obtain a parsimonious equilibrium characterized by a single scalar fixed point, yielding closed-form characterizations of equilibrium trading strategy, price impact within and across markets, and the informational efficiency of equilibrium prices.

Date: 2026-02
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2602.21125

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