A market model with medium/long-term effects due to an insider

Hiroaki Hata and Arturo Kohatsu-Higa

Quantitative Finance, 2013, vol. 13, issue 3, 421-437

Abstract: In this article, we consider a modification of the Karatzas--Pikovsky model of insider trading. Specifically, we suppose that the insider agent influences the long/medium-term evolution of Black--Scholes type model through the drift of the stochastic differential equation. We say that the insider agent is using a portfolio leading to a partial equilibrium if the following three properties are satisfied: (a) the portfolio used by the insider leads to a stock price which is a semimartingale under his/her own filtration and his/her own filtration enlarged with the final price; (b) the portfolio used by the insider is optimal in the sense that it maximises the logarithmic utility for the insider when his/her filtration is fixed; and (c) the optimal logarithmic utility in (b) is finite. We give sufficient conditions for the existence of a partial equilibrium and show in some explicit models how to apply these general results.

Date: 2013
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/14697688.2012.695084 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:13:y:2013:i:3:p:421-437

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RQUF20

DOI: 10.1080/14697688.2012.695084

Access Statistics for this article

Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral

More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().