Canonical decomposition of linear transformations of two independent Brownian motions motivated by models of insider trading

Motivated by the Kyle-Back model of "insider trading", we consider certain classes of linear transformations of two independent Brownian motions and study their canonical decomposition, i.e., their Doob-Meyer decomposition as semimartingales in their own filtration. In particular we characterize those transformations which generate again a Brownian motion.

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Year of publication:	1999
Authors:	Föllmer, Hans ; Wu, Ching-Tang ; Yor, Marc
Published in:	Stochastic Processes and their Applications. - Elsevier, ISSN 0304-4149. - Vol. 84.1999, 1, p. 137-164
Publisher:	Elsevier
Keywords:	Brownian motion Canonical decomposition Enlargement of filtration Insider trading Stochastic filtering theory Sturm-Liouville equation Volterra kernels

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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