Related papers: Asymptotic Glosten Milgrom equilibrium
The maximum entropy principle is a powerful tool for solving underdetermined inverse problems. This paper considers the problem of discretizing a continuous distribution, which arises in various applied fields. We obtain the approximating…
We analyze best response dynamics for finding a Nash equilibrium of an infinite horizon zero-sum stochastic linear quadratic dynamic game (LQDG) with partial and asymmetric information. We derive explicit expressions for each player's best…
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
This paper proposes a new equilibrium concept "robust perfect equilibrium" for non-cooperative games with a continuum of players, incorporating three types of perturbations. Such an equilibrium is shown to exist (in symmetric mixed…
In behavioral finance, aversion affects investors' judgment of future uncertainty when profit and loss occur. Considering investors' aversion to loss and risk, and the ambiguous uncertainty characterizing asset returns, we construct a…
We use a white noise approach to study the problem of optimal inside control of a stochastic delay equation driven by a Brownian motion B and a Poisson random measure N. In particular, we use Hida-Malliavin calculus and the Donsker delta…
In this paper, we present a multi-period trading model by assuming that traders face not only asymmetric information but also heterogenous prior beliefs, under the requirement that the insider publicly disclose his stock trades after the…
In this paper we consider a class of generalized Kyle-Back strategic insider trading models in which the insider is able to use the dynamic information obtained by observing the instantaneous movement of an underlying asset that is allowed…
This paper investigates the asymptotic behavior of stochastic recursive inclusions in the presence of non-zero, non-diminishing bias, a setting that frequently arises in zeroth-order optimization, stochastic approximation with…
We study the feasibility and noise sensitivity of portfolio optimization under some downside risk measures (Value-at-Risk, Expected Shortfall, and semivariance) when they are estimated by fitting a parametric distribution on a finite sample…
This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize…
We consider a Gaussian sequence model that contains ill-posed inverse problems as special cases. We assume that the associated operator is partially unknown in the sense that its singular functions are known and the corresponding singular…
We consider an optimal trading problem under a market impact model with endogenous market resistance generated by a sophisticated trader who (partially) detects metaorders and trades against them to exploit price overreactions induced by…
We revisit the classical Merton consumption--investment problem when risky-asset returns are modeled by stochastic differential equations interpreted through a general $\alpha$-integral, interpolating between It\^{o}, Stratonovich, and…
A constant weight asset allocation is a popular investment strategy and is optimal under a suitable continuous model. We study the tracking error for the target continuous rebalancing strategy by a feasible discrete-in-time rebalancing…
We study a class of finite-action disclosure games in which the sender's preferences are state-independent and the receiver's optimal action depends only on the expected state. While receiver-preferred equilibria in these games involve full…
In this paper we consider a discrete-time risk sensitive portfolio optimization over a long time horizon with proportional transaction costs. We show that within the log-return i.i.d. framework the solution to a suitable Bellman equation…
We introduce a modification of Perron's method, where semi-solutions are considered in a carefully defined asymptotic sense. With this definition, we can show, in a rather elementary way, that in a zero-sum game or a control problem (with…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…