Optimal Insider Strategy with Law Penalties
20 Pages Posted: 2 Dec 2012
Date Written: December 1, 2012
We study the optimal continuous trading strategy of an insider who is subject to the possibility of law penalties due to her illegal trading activity. This possibility was absent in previous works. Also, we discuss how to obtain the optimal penalty rule that maximize a welfare function.
Keywords: Insider trading, Law Penalties, Social Welfare
JEL Classification: G11, K42
Suggested Citation: Suggested Citation