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Abstract |
In this paper we extend Kyle-Back model of insider trading to the setting in which the insider has a dynamic information on an asset, under a linear conditional mean-field}-type dynamic model. Such dynamics contain many existing models as special cases, but it is put into a rigorous mathematical framework for the first time. We shall first prove a general well-posedness result for a class of linear conditional mean-field SDEs, which will be the foundation for the underlying dynamics of the optimization problem. We give a general necessary condition for the existence of optimal intensity of trading strategy in such a case, and when the dynamics is actually Vasi\v cek, we find a closed form of optimal intensity of trading strategy including the form of dynamic pricing rule set market makers and point out that in the equilibrium, all information is released by the insider and the intensity goes to infinity at the end of auction time. |
