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

DOI10.1214/21-AAP1678zbMATH Open1492.60109arXiv1906.03309OpenAlexW2948075003MaRDI QIDQ2117442FDOQ2117442

Authors: Yanyan Li 

Publication date: 21 March 2022

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

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).

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

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zbMATH Keywords

martingale optimal transportFitzpatrick functionKyle equilibriummaximal 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)

Cites Work

• Convex Analysis
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• Structure of optimal martingale transport plans in general dimensions

Cited In (4)

• On a problem of optimal transport under marginal martingale constraints
• Singularities of Fitzpatrick and convex functions
• The persuasion duality
• Backward martingale transport and Fitzpatrick functions in pseudo-Euclidean spaces

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