Existence of linear equilibria in the Kyle model with partial correlation and two risk neutral traders

Daher, Wassim; Saleeby, Elias G.

doi:10.1016/j.heliyon.2023.e17574

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Subgame 3: H Shares Information (A H = S)1

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2023

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“…Therefore, understanding the role of partial information and its implications to the regulatory aspects of the world of insider trading should be examined more closely. Secondly, in the case of general correlated signals (see [10]), a linear equilibrium might not be necessarily unique. This is an open question for future research.…”

Section: Subgame 3: H Shares Information (A H = S)mentioning

confidence: 99%

Insider Trading with Semi-Informed Traders and Information Sharing: The Stackelberg Game

Daher,

Karam,

Ahmed

2023

Mathematics

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This paper presents a financial Stackelberg game model with two partially informed risk neutral insiders. Each insider receives a private signal about the stock value and competes with the other insider under a Stackelberg setting. Linear strategies for the game’s participants are considered and normal distributions for the fundamentals are assumed. Based on the Stackelberg game and the Backward Induction theory, the unique linear equilibrium is characterized. The findings reveal that the level of partial information might increase/decrease the insiders’ profits as well as the market parameter in the Stackelberg setting relative to the Cournot setting. Additionally, this paper considers the information sharing scenario between the two insiders competing in this Stackelberg game. The results show that multiple equilibria exist in contrast to the information sharing scenario in the Cournot game where the Nash equilibrium is unique.

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Section: Subgame 3: H Shares Information (A H = S)mentioning

confidence: 99%