Abstract

https://ssrn.com/abstract=39822
 
 

References (44)



 
 

Citations (46)



 
 

Footnotes (40)



 


 



Information, Trade, and Derivative Securities


Michael J. Brennan


University of California, Los Angeles (UCLA) - Finance Area

H. Henry Cao


University of North Carolina (UNC) at Chapel Hill - Finance Area



Abstract:     
Hellwig's (1980) model isused to analyze the value of improvingtrading opportunities by more frequent trading in the underlying asset, or by trading in a derivative asset. With multiple trading sessions, uninformed investors behave as rational trend followers, while more informed investors follow a contrarian strategy. As trading becomes continuous, Pareto efficiency is achieved. With trading in an appropriate derivative security, Pareto efficiency may be achieved in only a single round of trading. All derivative claims are then priced on Black and Scholes (1973) principles and, in the absence of further supply shocks, no trading will take place in subsequent trading rounds.

Number of Pages in PDF File: 54

JEL Classification: G13, G14


Open PDF in Browser Download This Paper

Date posted: July 8, 1997  

Suggested Citation

Brennan, Michael J. and Cao, H. Henry, Information, Trade, and Derivative Securities. Available at SSRN: https://ssrn.com/abstract=39822 or http://dx.doi.org/10.2139/ssrn.39822

Contact Information

Michael John Brennan (Contact Author)
University of California, Los Angeles (UCLA) - Finance Area ( email )
Los Angeles, CA 90095-1481
United States
310-825 3587 (Phone)
310-206 8419 (Fax)
Huining Henry Cao
University of North Carolina (UNC) at Chapel Hill - Finance Area ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

Feedback to SSRN


Paper statistics
Abstract Views: 2,048
Downloads: 433
Download Rank: 50,641
References:  44
Citations:  46
Footnotes:  40