Related papers: Equilibrium Asset Pricing with Transaction Costs
In many first-price auctions, bidders face considerable strategic uncertainty: They cannot perfectly anticipate the other bidders' bidding behavior. We propose a model in which bidders do not know the entire distribution of opponent bids…
We develop a version of the fundamental theorem of asset pricing for discrete-time markets with proportional transaction costs and model uncertainty. A robust notion of no-arbitrage of the second kind is defined and shown to be equivalent…
In this paper, we show that if every consumer in an economy has a quasi-linear utility function, then the normalized equilibrium price is unique, and is locally stable with respect to the t\^atonnement process. Our study can be seen as that…
We propose a new methodology to compute equilibria for general equilibrium problems on exchange economies with real financial markets, home-production, and retention. We demonstrate that equilibrium prices can be determined by solving a…
The large majority of risk-sharing transactions involve few agents, each of whom can heavily influence the structure and the prices of securities. This paper proposes a game where agents' strategic sets consist of all possible sharing…
We prove the existence of a Radner equilibrium in a model with proportional transaction costs on an infinite time horizon and analyze the effect of transaction costs on the endogenously determined interest rate. Two agents receive…
Optimal multi-asset trading with Markovian predictors is well understood in the case of quadratic transaction costs, but remains intractable when these costs are $L_1$. We present a mean-field approach that reduces the multi-asset problem…
We derive the arbitrage gains or, equivalently, Loss Versus Rebalancing (LVR) for arbitrage between \textit{two imperfectly liquid} markets, extending prior work that assumes the existence of an infinitely liquid reference market. Our…
We obtain an exact necessary and sufficient condition for the existence and uniqueness of equilibrium asset prices in infinite horizon, discrete-time, arbitrage free environments. Through several applications we show how the condition…
In an incomplete continuous-time securities market with uncertainty generated by Brownian motions, we derive closed-form solutions for the equilibrium interest rate and market price of risk processes. The economy has a finite number of…
We solve in closed-form an equilibrium model in which a finite number of exponential investors continuously consume and trade with price-impact. Compared to the analogous Pareto-efficient equilibrium model, price-impact has an amplification…
We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost.…
A market with asymmetric information can be viewed as a repeated exchange game between the informed sector and the uninformed one. In a market with risk-neutral agents, De Meyer [2010] proves that the price process should be a particular…
The present article provides a novel theoretical way to evaluate tradeability in markets of ordinary exponential L\'evy type. We consider non-tradeability as a particular type of market illiquidity and investigate its impact on the price of…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
We consider indifference pricing of contingent claims consisting of payment flows in a discrete time model with proportional transaction costs and under exponential disutility. This setting covers utility maximisation as a special case. A…
We propose a set of conservative models in which agents exchange wealth with a preference in the choice of interacting agents in different ways. The common feature in all the models is that the temporary values of financial status of agents…
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 study a continuous-time portfolio choice problem for an investor whose state-dependent preferences are determined by an exogenous factor that evolves as an It\^o diffusion process. Since risk attitudes at the end of the investment…
In the paper we study markets with concave transaction costs which depend in a concave way on the volume of transaction. This is typical situation in the case of small investors, which commonly appears in currency and real estate markets.…