Year: 2026
Type: preprint
Abstract: The seminal Kyle model offers a framework to understand the price impact of an informed trader in a market model for a single asset. We study variants in which the asset's future value is modeled by a classical random walk and by a continuous-time quantum walk, respectively. With these assumptions, we analytically approximate and numerically identify the market equilibrium between risk-neutral market maker and informed trader. In the classical equilibrium, the informed trader possesses a linear strategy, whereas the market maker's pricing rule resembles a logistic curve. The informed trader's profit is also identified to grow sub-linearly with time t. In the quantum equilibrium, the informed trader's strategy forms multiple clusters and the pricing rule exhibits multiple jumps correspondingly. Despite the increasing non-linearity of the equilibrium, the informed trader's profit grows linearly with time t.
Source: arXiv (Cornell University)
Authors: Liew, H. W. Shawn, Rebentrost, Patrick
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7220707334