• Kyle model
• multivariate Kyle model
• neural network
• price impact

Financial markets are complex systems influenced by a variety of factors.
Understanding and modeling these dynamics is crucial for predicting market
behavior, managing risk, and developing trading strategies. The Kyle model,
introduced by Albert Kyle in 1985, was one of the first to explore these
dynamics, particularly how information is incorporated into asset prices. Despite
its extensive study and widespread use in financial economics, the Kyle
model relies on assumptions that limit its applicability in real-world markets.
In this thesis, I aim to further explore the Kyle model by relaxing some of
its key assumptions. To achieve this, I have developed a neural network that
allows for a more flexible examination of market dynamics.
The first chapter serves as an introduction, where I describe the financial
markets, introduce the concept of market efficiency, discuss various types of
securities, and outline the main market participants.
The second chapter delves into the technical aspects of market efficiency, exploring
how it can be unsaturated in markets. This chapter also discusses
Walrasian models, market makers, and limit order books (LOB), and concludes
with a discussion of empirical results related to market impact.
In the third chapter, I will present Kyle’s model, beginning with the singleperiod
asset case. I will then extend the model to multi-period cases, both
discrete and continuous, following the original work [18]. Detailed analysis
of the results and the model’s limitations will be provided. Additionally, I
will discuss the Kyle model in a multi-asset context, building on the work of
Mastromatteo et al.
The final chapter focuses on the neural network architecture used to replicate
the Kyle model in the single-period asset case. I will analyze the results
obtained by relaxing certain assumptions. Finally, by making slight
modifications to the network architecture, I will extend the analysis to the
single-period multi-asset case.