Related papers: Pricing in an equilibrium based model for a large …
This paper proposes a theory of pricing premised upon the assumptions that customers dislike unfair prices---those marked up steeply over cost---and that firms take these concerns into account when setting prices. Since they do not observe…
Pricing of high-dimensional options is a deep problem of the Theoretical Financial Mathematics. In this article we present a new class of L\'{e}vy driven models of stock markets. In our opinion, any market model should be based on a…
We propose a simple statistical-physics-inspired model for the effect of intrinsic fluctuations on supply and demand in markets. The model consists of agents that trade in two types of goods of which the total number is separately…
In a discrete-time financial market model with instantaneous price impact, we find an asymptotically optimal strategy for an investor maximizing her expected wealth. The asset price is assumed to follow a process with negative memory. We…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…
Market impact has become a subject of increasing concern among academics and industry experts. We put forward a price impact model which considers the heteroscedasticity of price in the time dimension and dependency between permanent impact…
Traditional competitive markets do not account for negative externalities; indirect costs that some participants impose on others, such as the cost of over-appropriating a common-pool resource (which diminishes future stock, and thus…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
When learning is used to inform decisions about humans, such as for loans, hiring, or admissions, this can incentivize users to strategically modify their features, at a cost, to obtain positive predictions. The common assumption is that…
An asset pricing model using long-run capital share growth risk has recently been found to successfully explain U.S. stock returns. Our paper adopts a recursive preference utility framework to derive an heterogeneous asset pricing model…
We consider a popular model of microeconomics with countably many assets: the Arbitrage Pricing Model. We study the problem of optimal investment under an expected utility criterion and look for conditions ensuring the existence of optimal…
Trading a financial asset pushes its price as well as the prices of other assets, a phenomenon known as cross-impact. The empirical estimation of this effect on complex financial instruments, such as derivatives, is an open problem. To…
We consider the Bachelier model with linear price impact. Exponential utility indifference prices are studied for vanilla European options and we compute their non-trivial scaling limit for a vanishing price impact which is inversely…
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 study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…
We study a continuous-time version of the intermediation model of Grossman and Miller (1988). To wit, we solve for the competitive equilibrium prices at which liquidity takers' demands are absorbed by dealers with quadratic inventory costs,…
We formulate an equilibrium model of intraday trading in electricity markets. Agents face balancing constraints between their customers consumption plus intraday sales and their production plus intraday purchases. They have continuously…
This paper examines a trade execution game for two large traders in a generalized price impact model. We incorporate a stochastic and sequentially dependent factor that exogenously affects the market price into financial markets. Our model…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…