Price dynamics on a risk averse market with asymmetric information

Bernard De Meyer () and Gaëtan Fournier
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Bernard De Meyer: Paris School of Economics - Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.univ-paris1.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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 (search for similar items in EconPapers)
JEL-codes: C72 C73 D44 G14 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2015-06
New Economics Papers: this item is included in nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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ftp://mse.univ-paris1.fr/pub/mse/CES2015/15054.pdf (application/pdf)

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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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:15054

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