Related papers: A model for a large investor trading at market ind…
We develop a single-period model for a large economic agent who trades with market makers at their utility indifference prices. A key role is played by a pair of conjugate saddle functions associated with the description of Pareto optimal…
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising…
In this paper we introduce a completely continuous and time-variate model of the evolution of market limit orders based on the existence, uniqueness, and regularity of the solutions to a type of stochastic partial differential equations…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
We consider a continuous-time game-theoretic model of an investment market with short-lived assets and endogenous asset prices. The first goal of the paper is to formulate a stochastic equation which determines wealth processes of investors…
We consider a stochastic game between three types of players: an inside trader, noise traders and a market maker. In a similar fashion to Kyle's model, we assume that the insider first chooses the size of her market-order and then the…
We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…
We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…
In this paper we present a continuous time dynamical model of heterogeneous agents interacting in a financial market where transactions are cleared by a market maker. The market is composed of fundamentalist, trend following and contrarian…
In the large financial market, which is described by a model with countably many traded assets, we formulate the problem of the expected utility maximization. Assuming that the preferences of an economic agent are modeled with a stochastic…
In order to simulate the complex phenomena manifested in stock markets, we introduce a continuous asynchronous model in which millions of individual traders interact through a central orders matching mechanism, just as it happens in real…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
Approximations to utility indifference prices are provided for a contingent claim in the large position size limit. Results are valid for general utility functions on the real line and semi-martingale models. It is shown that as the…
In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…
This paper develops a mathematical framework for the analysis of continuous-time trading strategies which, in contrast to the classical setting of continuous-time mathematical finance, does not rely on stochastic integrals or other…