  We analyze price discovery in a model where an agent has arbitrary private
information regarding state probabilities and trades state-contingent claims.
Our model unifies the elements of Arrow and Debreu (1954) and Kyle (1985). In
the equivalent options formulation, the informed agent has arbitrary
information regarding an underlying asset's payoff distribution and trades
option portfolios. We characterize the informed demand, the price impact, and
the information efficiency of prices. Our informed demand formula explains
those option trading strategies used in practice -- e.g., for volatility
trading.
