Trading constraints in continuous-time Kyle models

16 Jun 2022  ·  Jin Hyuk Choi, Heeyoung Kwon, Kasper Larsen ·

In a continuous-time Kyle setting, we prove global existence of an equilibrium when the insider faces a terminal trading constraint. We prove that our equilibrium model produces output consistent with several empirical stylized facts such as autocorrelated aggregate holdings, decreasing price impacts over the trading day, and U shaped optimal trading patterns.

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