Related papers: Equilibrium pricing under relative performance con…
We introduce a strategic behavior in reinsurance bilateral transactions, where agents choose the risk preferences they will appear to have in the transaction. Within a wide class of risk measures, we identify agents' strategic choices to a…
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…
We propose a continuous-time model of trading with heterogeneous beliefs. Risk-neutral agents face quadratic costs-of-carry on positions and thus their marginal valuations decrease with the size of their position, as it would be the case…
The paper studies an oligopolistic equilibrium model of financial agents who aim to share their random endowments. The risk-sharing securities and their prices are endogenously determined as the outcome of a strategic game played among all…
We model real-world data markets, where sellers post fixed prices and buyers are free to purchase from any set of sellers, as a simultaneous game. A key component here is the negative externality buyers induce on one another due to data…
We study equilibrium in hedonic markets, when consumers and suppliers have reservation utilities, and the utility functions are separable with respect to price. There is one indivisible good, which comes in different qualities; each…
This work solves the equilibrium price formation problem for the risky stock by combining mean-field game theory with the binomial tree framework, adapting the classic approach of Cox, Ross \& Rubinstein. For agents with exponential and…
This paper develops a dynamic insurance market model comprising two competing insurance companies and a continuum of insureds, and examines the interaction between strategic underreporting by the insureds and competitive pricing between the…
This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash…
We introduce the Estimated Dynamic Equilibrium Model (EDEM), an agent-based framework that treats supply and demand as a coupled stochastic process driven by heterogeneous, noisy agent valuations. The model's primary technical contribution…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
This paper develops a dynamic equilibrium model where agents exhibit a strong form of belief heterogeneity: they disagree about zero probability events. It is shown that, somewhat surprisingly, equilibrium exists in this setting, and that…
Interference between treated and untreated units is a source of bias in marketplace experiments. In this paper, we specifically consider pricing interventions, in which a platform seeks to adjust base pricing levels at the marketplace level…
We obtain stability estimates and derive analytic expansions for local solutions of multi-dimensional quadratic BSDEs. We apply these results to a financial model where the prices of risky assets are quoted by a representative dealer in…
This paper studies the optimal investment problem with random endowment in an inventory-based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules…
We study an optimal execution problem in illiquid markets with both instantaneous and persistent price impact and stochastic resilience when only absolutely continuous trading strategies are admissible. In our model the value function can…
In this paper, we consider the problem of a Principal aiming at designing a reward function for a population of heterogeneous agents. We construct an incentive based on the ranking of the agents, so that a competition among the latter is…
In this paper, we consider the problem of equal risk pricing and hedging in which the fair price of an option is the price that exposes both sides of the contract to the same level of risk. Focusing for the first time on the context where…
We study the power and limitations of posted prices in multi-unit markets, where agents arrive sequentially in an arbitrary order. We prove upper and lower bounds on the largest fraction of the optimal social welfare that can be guaranteed…
We present a simple model of a non-equilibrium self-organizing market where asset prices are partially driven by investment decisions of a bounded-rational agent. The agent acts in a stochastic market environment driven by various exogenous…