Strategic trade models of asymmetric information：信息不对称战略贸易模型.doc

Strategic trade models of asymmetric information-Kyle (1985) Assumption: There is a single informed trader who behaves strategically. She sets her trade size taking into account the adverse price concession associated with larger quantities. The elements of the model are: ? The terminal security value is v ~ N(p0, Σ0). ? There is one informed trader who knows v and enters a demand x (buying if x 0, selling if x 0). ? Liquidity traders submit a net order flow u ~ N(0, σu2), independent of v. ? The market-maker (MM) observes the total demand y = x + u and then sets a price, p. ? All of the trades are cleared at p. If there is an imbalance between buyers and sellers, the MM makes up the difference. Note that nobody knows the market clearing price when they submit their orders. Since the liquidity trader order flow is exogenous, there are really only two players we need to concentrate on: the informed trader and the market maker. The informed trader wants to trade aggressively, e.g., buying a large quantity if her information is positive. But the MM knows that if he sells into a large net customer buy, he is likely to be on the wrong side of the trade. He protects himself by setting a price that is increasing in the net order flow. This acts as a brake on the informed traders desires: if she wishes to buy a lot, shell have to pay a high price. The solution to the model is a formal expression of this trade-off. We first consider the informed traders problem (given a conjectured MM price function), and then show that the conjectured price function is consistent with informed traders optimal strategy. The informed traders problem The informed trader conjectures that the MM uses a linear price adjustment rule: (1) p = yλ + μ, where y is the total order flow (i.e., y = u + x). λ in the price conjecture is an inverse measure of liquidity. The informed traders profits are: (2) π = (v – p)x Substituting in for the price