Price dynamics on a risk averse market with asymmetric information

Bernard de Meyer () and Gaëtan Fournier
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Bernard de Meyer: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: A market with asymmetric information can be viewed as a repeated exchange game between an informed sector and an uniformed sector. The case where all agents in the market are risk neutral was analyzed in De Meyer [2010]. The main result of that paper was that the price process in this risk neutral environment should be a particular kind o Brownian martingale called CMMV. This type of dynamics is due to the strategic use of their private information by the informed agents. In this paper, we generalize this analysis to the case of a risk averse market. Our main result is that the price process is still a CMMV under a martingale equivalent measure.

Keywords: asymmetric information; price dynamics; martingales of maximal variation; repeated games; martingale equivalent measure; risk aversion; asymétrie d'information; dynamique des prix; martingale à variation maximales; jeux répétés; mesure martingale équivalente; aversion au risque (search for similar items in EconPapers)
Date: 2015-06
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01169563v1
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Published in 2015

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Related works:
Working Paper: Price dynamics on a risk averse market with asymmetric information (2015)
Working Paper: Price dynamics on a risk averse market with asymmetric information (2015)
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