Apart from in one feature to be discussed below, Gennotte and Leland's is a "rational-expectations" model: it posits investors who have a correct understanding of the price dynamics presumed in the model. The model is of the determination by supply and demand of the price, p°, of a single risky asset, which can be "interpreted as the stock market portfolio" (Gennotte and Leland 1990, p. 1006). Part of the demand for the asset comes from "uninformed investors ... who observe only p0" in other words, whose only source of information about the future price of the asset is inference from its current observed price (Gennotte and Leland 1990, p. 1002). Part of the supply of the asset results from the activities of portfolio insurers, who sell increased quantities of it as its price falls. That supply is it(po), a deterministic, decreasing function of p°.

Donald MacKenzie, An Engine, Not a Camera, loc. 867