An optimal transport problem with backward martingale constraints motivated by insider trading

DOI10.1214/21-AAP1678MaRDI QIDQ2117442zbMATH OpenOpenAlexFDO

Authors Yanyan Li

Publication date 21 March 2022

Published in The Annals of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1906.03309

zbMATH Keywords

Fitzpatrick functionKyle equilibriummartingale optimal transportmaximal monotone set

Mathematics Subject Classification ID

Martingales with discrete parameter (60G42) Microeconomic theory (price theory and economic markets) (91B24) Special types of economic equilibria (91B52)

Abstract: We study a single-period optimal transport problem on $mathbb{R}^2$ with a covariance-type cost function $c(x,y)=(x_1-y_1)(x_2-y_2)$ and a backward martingale constraint. We show that a transport plan $gamma$ is optimal if and only if there is a maximal monotone set $G$ that supports the $x$-marginal of $gamma$ and such that $c(x,y)=mi{n}_{zinG}c(z,y)$ for every $(x,y)$ in the support of $gamma$. We obtain sharp regularity conditions for the uniqueness of an optimal plan and for its representation in terms of a map. Our study is motivated by a variant of the classical Kyle model of insider trading from Rochet and Vila (1994).

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Cites work

• An explicit martingale version of the one-dimensional Brenier theorem
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• Insider Trading without Normality
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Cited in

(9)

• On a problem of optimal transport under marginal martingale constraints
• Backward martingale transport and Fitzpatrick functions in pseudo-Euclidean spaces
• Singularities of Fitzpatrick and convex functions
• The persuasion duality
• An abstract decomposition of measures and its many applications
• Insider trading with penalties in continuous time
• Insider trading in discrete time Kyle games
• Martingale transports and Monge maps
• Data denoising with self-consistency, variance maximization, and the Kantorovich dominance

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