Equilibrium model with default and insider ’ s dynamic information ∗
نویسندگان
چکیده
We consider an equilibrium model à la Kyle-Back for a defaultable claim issued by a given firm. In such a market the insider observes continuously in time the value of firm, which is unobservable by the market makers. Using the construction of a dynamic Bessel bridge of dimension 3 in [5], we provide the equilibrium price and the optimal insider’s strategy. As in [3], the information released by the insider while trading optimally makes the default time predictable in market’s view at the equilibrium. We conclude the paper by comparing the insider’s expected profits in the static and dynamic private information case. We also compute explicitly the value of insider’s information in the special cases of a defaultable stock and a bond. Key-words: Default time, defaultable claim, equilibrium, dynamic information, insider trading, dynamic Bessel bridge. AMS classification (2000): 60G44, 60H05, 60H10, 93E11. JEL classification: D82, G14.
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