Canonical decomposition of linear transformations of two independent Brownian motions motivated by models of insider trading

Hans Föllmer, Ching-Tang Wu and Marc Yor

Stochastic Processes and their Applications, 1999, vol. 84, issue 1, 137-164

Abstract: Motivated by the Kyle-Back model of "insider trading", we consider certain classes of linear transformations of two independent Brownian motions and study their canonical decomposition, i.e., their Doob-Meyer decomposition as semimartingales in their own filtration. In particular we characterize those transformations which generate again a Brownian motion.

Keywords: Brownian; motion; Canonical; decomposition; Enlargement; of; filtration; Insider; trading; Stochastic; filtering; theory; Sturm-Liouville; equation; Volterra; kernels (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (9)

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