Informed traders’ hedging with news arrivals

We study a hedging and pricing problem of a market with jumps, where both jump sizes and the timing are affected by exclusive information available only to informed traders. The exclusive information process is a continuous time stochastic process, but affects the price process only at discrete times through jumps. This model is an extension of Lee and Song (2007), where the exclusive information affects only the jump timing, and Kang and Lee (forthcoming), where the exclusive information affects only jump sizes. We find the local risk minimization hedging strategy of informed traders.