Kyle's Model

Trading Large Orders in the Presence of Multiple High-Frequency Anticipatory Traders ArXiv ID: 2403.08202 “View on arXiv” Authors: Unknown Abstract We investigate a market with a normal-speed informed trader (IT) who may employ mixed strategy and multiple anticipatory high-frequency traders (HFTs) who are under different inventory pressures, in a three-period Kyle’s model. The pure- and mixed-strategy equilibria are considered and the results provide recommendations for IT’s randomization strategy with different numbers of HFTs. Some surprising results about investors’ profits arise: the improvement of anticipatory traders’ speed or a more precise prediction may harm themselves but help IT. ...

Is Kyle’s equilibrium model stable? ArXiv ID: 2307.09392 “View on arXiv” Authors: Unknown Abstract In the dynamic discrete-time trading setting of Kyle (1985), we prove that Kyle’s equilibrium model is stable when there are one or two trading times. For three or more trading times, we prove that Kyle’s equilibrium is not stable. These theoretical results are proven to hold irrespectively of all Kyle’s input parameters. Keywords: Kyle’s model, market microstructure, equilibrium stability, dynamic trading, information asymmetry, Equities (Microstructure) ...