A Characterization of the Distributions that Imply Existence of Linear Equilibria in the Kyle Model

17 Pages Posted: 15 May 2005

See all articles by Georg Nöldeke

Georg Nöldeke

University of Basel; University of Basel

Thomas Tröger

University of Bonn - Institute of Economic Theory III - Department of Economics

Date Written: May 10, 2005

Abstract

The existence of a linear equilibrium in Kyle's model of market making with multiple, symmetrically informed strategic traders is implied for any number of strategic traders if the joint distribution of the underlying exogenous random variables is elliptical. The reverse implication has been shown for the case in which the random variables are independent and have finite second moments. Here we extend this result to the case in which the underlying random variables are not necessarily independent and their joint distribution is determined by its moments.

Keywords: Market Microstructure, Kyle Model, Linear Equilibria, Elliptical Distributions

JEL Classification: G14, D82

Suggested Citation

Nöldeke, Georg and Tröger, Thomas, A Characterization of the Distributions that Imply Existence of Linear Equilibria in the Kyle Model (May 10, 2005). Available at SSRN: https://ssrn.com/abstract=721502 or http://dx.doi.org/10.2139/ssrn.721502

Georg Nöldeke (Contact Author)

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

HOME PAGE: http://sites.google.com/site/georgnoldeke/

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

HOME PAGE: http://sites.google.com/site/georgnoldeke/

Thomas Tröger

University of Bonn - Institute of Economic Theory III - Department of Economics ( email )

Postfach 2220
D-53012 Bonn
Germany

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