Eduardo Ferioli (IME/UFF)

Título: Kyle-Back Model with a Public Signal and its Applications

Resumo: In traditional Kyle-Back models, the only source of information comes from the insider’s signal. We consider a more realistic version of the Kyle-Back model with a private and a public signal. The insider observes both signals. The private signal, that is only directly observed by the insider, may be static, when the insider knows the value of the asset in advance, or dynamic, when it converges to the true value of the asset at the end of the trading period. The market maker receives a dynamic signal that also converges to the true value of the asset at the end of the trading period. In the dynamic case, we prove that the insider’s valuation of the asset is given by a linear combination of both the public and private signals and it is a martingale the insider’s filtration. Furthermore, we show that the price – which is the market maker’s valuation of the asset – is also given by a linear combination of the public signal and the weighted demand. In this talk we briefly discuss applications in which the public signal may arise such as High Frequency Trading, Market Fragmentation and competing Insiders. This is a joint work with Umut Çetin (LSE).  

Data: 27/11/2024, quarta-feira

Horário: 16:00

Local: sala 202, bloco H, IME/UFF