Some new results on equilibrium with a possibly informed large trader

OMI Seminar Series

The seminar will describe results in three working papers:  Liquidity and Governance, Detecting the Presence of an Informed Trader and Other Atoms in Kyle Models, and The Informational Role of Stock and Bond Volume.  Each of the three papers extends the continuous-time Kyle (1985) model.  In the first paper, the large trader has no information about the fundamental asset value, but he may choose to become active in the governance of the firm or to sell his stake, and this choice affects the value of the firm.  In the second paper, the results of Back (1992) are extended to discontinuous asset value distributions using the theory of Doob h-transforms.  Applications are to a trader who may or may not have private information and to a firm that has a nonzero probability of bankruptcy.  The third paper extends the results of the second to joint trading in the debt and equity of a firm, similar to the analysis of stock and option trading in Back (1993). 

 

Location:
Speaker(s):

Kerry Back (Rice University’s Jones Graduate School of Business)

Date:
Tuesday, May 7, 2013 - 12:30
to 13:30