This paper examines the formation of option transaction prices in an imperfect market where risk-averse dealers face liquidity and informed traders. Because of market imperfections, trading is costly and arbitrage pricing does not apply. Rather, the transaction prices are related to the dealers'...

One often quoted reason for the incompleteness of financial markets is the fact that an informational asymmetry prevents entrepreneurs to float their company on the market. In fact, the privileged information that the owners have on their firms discourages rational financial investors and thins...

In this paper, we consider a Kyle type model of insider trading. We show that: i) there exists a unique equilibrium independently of the distribution of uncertainty; ii) this equilibrium minimizes the expected gains of the insider under incentive compatibility constraints. We extend our results...