content_image/296136.jpg content_image/296135.jpg content_image/296137.jpg
where H ∗ satisfies 

i.e. H $^{∗}$( y, t ) = E [ f ( y + B 2 1 − B 2 $_{t}$) ] and 

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<img src='content_image/296135.jpg'>

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is an equilibrium. Moreover, the pricing rule H ∗ is the unique inconspicuous equilibrium pricing rule in H . Furthermore, given this pricing rule H $^{∗}$, the trading strategy θ ∗ is optimal in A ( H $^{∗}$) for the insider if and only if 

1. The process θ ∗ t is continuous and has bounded variation. 

2. The total order, Y ∗ t = θ ∗ t + B 2 $_{t}$, satisfies Y ∗ 1 = Z$_{1}$. 

Therefore, when the parameters of the market satisfy the stated assumptions, there exists a unique Markovian pricing rule such that: a) at least one optimal trading strategy of the insider, given by (3.9), is increasing market efficiency during all trading periods since the insider pushes the price to the fundamental value of the stock, b) due to 1 , the variance of the risky asset is not influenced by insider’s trading if she trades optimally, and c) the insider presence increases market efficiency close to the market termination time due to 2 . 

I will prove this theorem in three propositions that focus on different aspects of the equilibrium. 

In particular, the propositions will address: a) characterization of the optimal insider trading strategy, b) existence of the equilibrium, and c) uniqueness of the inconspicuous pricing rule. 

The conclusion of Theorem 3.1 is driven by the following result: for any pricing rule in H satisfying equation (3.7), there exists a finite upper bound on the informed agent’s value function which is attained by a trading strategy which is not detectable by the market maker, not locally correlated with noisy trades, and such that all the private information is revealed only at time t = 1. 

