Strategic Trading With Information Flow And Regulation

In the insider trading market,the existence of market regulators is necessary,and can fill the loopholes in the insider trading system and promote the development of the futures market.This paper constructs a multi-period trading model of information flow and market regulators,and studies insider trading behavior in the market in this context.Insider traders are risk-averse and rely on long-term private information.The model is calculated to obtain the parameters related to market equilibrium,and the model results of non-market regulators are compared and analyzed,and the impact of market regulators on insider trading behavior and market equilibrium is studied.The trading body in the market consists of four parts: risk-averse insider traders,several noise traders,a risk-neutral market maker and market regulator.In this paper,a multi-period equilibrium model is established,and the existence and uniqueness of linear symmetric equilibrium are proved by reverse induction method.It is calculated that the optimal regulatory intensity of market regulators is 0,that is,the optimal regulatory policy is not to regulate insider trading,but the existence of regulators has a greater impact on equilibrium.After numerical simulation and comparative research,it is found that when only private information exists,the existence of market regulators will promote insider trading,resulting in rapid disclosure of private information and improved market stability.Moreover,the higher the initial intensity of private information,the lower the risk aversion of insider traders and the more significant the influence of regulators.This effect is most pronounced in the presence of monopolistic insider traders.When private information flow and public information exist at the same time,regulators have little impact on trading behavior when public information flow exists,and when only insider traders with terminal public information impact and monopoly exist,insider trading will be promoted,resulting in rapid disclosure of private information and improved market stability.