文档介绍：Insider and Liquidity Trading
in Stock and Options Markets
Bruno Biais
Université de Toulouse
Pierre Hillion
INSEAD
We analyze the introduction of a nonredundant
option, pletes the markets, and the effects
of this on information revelation and risk shar-
ing. The option alters the interaction between
liquidity and insider trading. We find that the
option mitigates the market breakdown problem
created by bination of market plete-
ness and asymmetric information. The introduc-
tion of the option has ambiguous consequences on
the informational efficiency of the market. On the
one hand, by avoiding market breakdown, it ena-
bles trades to occur and convey information. On
the other hand, the introduction of the option
enlarges the set of trading strategies the insider
can follow. This can make it more difficult the
market makers to interpret the information con-
tent of trades and consequently can reduce the
informational efficiency of the market. The intro-
duction of the option also has an ambiguous effect
on the profitability of insider trades, which can
either increase or decrease depending on param-
eter values.
We gratefully acknowledge the ments of the editor, Rick Green,
and the referee. We also thank seminar participants at Basel Universität,
Carnegie Mellon University, Cornell University, Dauphine University, Delta,
Banque de France, the London Business School, the London School of Eco-
nomics, the Séminaire d’Economic Théorique René Roy, the Stockholm
School of Economics, UCLA, Université Libre de Bruxelles, Vanderbilt Uni-
versity, and at the Fédération Francaise des Sociétés d’Assurance seminar in
Université de Toulouse. Address correspondence to B. Biasis, Institut d’E-
conomic Industrielle, Université des Sciences Sociales, Place Anatole France,
FR-31042 Toulouse Cedex, France. e-mail:******@
The Review of Financial Studies Winter 1994 Vol. 7, No. 4, pp. 743-780
© 1994 The Review of Financial Studies 0893-9