Related papers: Spiraling toward market completeness and financial…
As demonstrated during the recent financial crisis, regulators require additional analytical tools to assess systemic risk in the financial sector. This paper describes one such tool; namely a novel market modeling and analysis capability.…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination…
In order to find a way of measuring the degree of incompleteness of an incomplete financial market, the rank of the vector price process of the traded assets and the dimension of the associated acceptance set are introduced. We show that…
We consider a competitive market with risk-averse participants. We assume that agents' risks are measured by coherent risk measures introduced by Artzner et al. (1999). Fundamental theorems of welfare economics have long established the…
The integration and innovation of finance and technology have gradually transformed the financial system into a complex one. Analyses of the causesd of abnormal fluctuations in the financial market to extract early warning indicators…
We investigate the possibility of statistical evaluation of the market completeness for discrete time stock market models. It is known that the market completeness is not a robust property: small random deviations of the coefficients…
This study investigates the prevention of market manipulation using a price-impact model of financial market trading as a linear system. First, I define a trading game between speculators such that they implement a manipulation trading…
It is suggested to consider long term trends of financial markets as a growth phenomenon. The question that is asked is what conditions are needed for a long term sustainable growth or contraction in a financial market? The paper discuss…
This paper presents a dynamic game framework to analyze the role of large banks in interbank markets. By extending existing models, we incorporate a large bank as a dynamic decision-maker interacting with multiple small banks. Using the…
The effectiveness of utility-maximization techniques for portfolio management relies on our ability to estimate correctly the parameters of the dynamics of the underlying financial assets. In the setting of complete or incomplete financial…
Stability of the utility maximization problem with random endowment and indifference prices is studied for a sequence of financial markets in an incomplete Brownian setting. Our novelty lies in the nonequivalence of markets, in which the…
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following a diffusion with stochastic volatility. In the current financial market especially, it is important to…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…
An investor trades a safe and several risky assets with linear price impact to maximize expected utility from terminal wealth. In the limit for small impact costs, we explicitly determine the optimal policy and welfare, in a general…
This paper studies the response of stock markets relative to the banking sector to innovation by using a panel of 75 countries from 1982 to 2021. We find that innovation increases the activity, efficiency and size of stock markets relative…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…
We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…
The money market and the capital market of the Indian financial markets have a symbiotic relationship in the development of the Indian economy. The nature and the characteristics of the markets differ to a large extent as the money market…