Insider Trading Equilibrium in a Market with Memory

We consider the Kyle-Back model for insider trading, with the difference that the classical Brownian motion noise of the noise traders is replaced by the noise of a fractional Brownian motion BH with Hurst parameter H > 12 (when H = 1 2 , B H coincides with the classical Brownian motion). Heuristically, for H > 12 this means that the noise traders has some… CONTINUE READING