[KSCI] Korea Science Citation Index Service

http://dx.doi.org/10.7737/MSFE.2013.19.1.011

A Risk-Averse Insider and Asset Pricing in Continuous Time

Lim, Byung Hwa (Graduate School of Financial Eng., The University of Suwon)

Publication Information

Management Science and Financial Engineering / v.19, no.1, 2013 , pp. 11-16 More about this Journal

Abstract

This paper derives an equilibrium asset price when there exist three kinds of traders in financial market: a risk-averse informed trader, noise traders, and risk neutral market makers. This paper is an extended version of Kyle's (1985, Econometrica) continuous time model by introducing insider's risk aversion. We obtain not only the equilibrium asset pricing and market depth parameter but also insider's value function and optimal insider's trading strategy explicitly. The comparative static shows that the market depth (the reciprocal of market pressure) increases with time and volatility of noise traders' trading.

Keywords

Risk-Aversion; Informed Trader; Asset Pricing; Market Depth; Dynamic Programming Principle;

Citations & Related Records

Reference

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