Price dynamics on a risk averse market with asymmetric information

Abstract : A market with asymmetric information can be viewed as a repeated exchange game between an informed sector and an uniformed sector. The case where all agents in the market are risk neutral was analyzed in De Meyer [2010]. The main result of that paper was that the price process in this risk neutral environment should be a particular kind o Brownian martingale called CMMV. This type of dynamics is due to the strategic use of their private information by the informed agents. In this paper, we generalize this analysis to the case of a risk averse market. Our main result is that the price process is still a CMMV under a martingale equivalent measure.
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Submitted on : Monday, June 29, 2015 - 4:34:41 PM
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Bernard de Meyer, Gaëtan Fournier. Price dynamics on a risk averse market with asymmetric information. 2015. ⟨halshs-01169563⟩

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