Related papers: Illiquid Financial Markets and Monetary Policy

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…

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…

In illiquid markets, option traders may have an incentive to increase their portfolio value by using their impact on the dynamics of the underlying. We provide a mathematical framework within which to value derivatives under market impact…

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…

Asset liquidity in modern financial markets is a key but elusive concept. A market is often said to be liquid when the prevailing structure of transactions provides a prompt and secure link between the demand and supply of assets, thus…

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 study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential…

We prove the Fundamental Theorem of Asset Pricing for a discrete time financial market where trading is subject to proportional transaction cost and the asset price dynamic is modeled by a family of probability measures, possibly…

In this paper, I introduce a profit-maximizing centralized marketplace into a decentralized market with search frictions. Agents choose between the centralized marketplace and the decentralized bilateral trade. I characterize the optimal…

We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…

Beyond its obvious macro-economic relevance, fiat money has important micro-economic implications. They matter for addressing No. 8 in Smale's "Mathematical Problems for the Next Century": extend the mathematical model of general…

We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…

We study a dynamic asset pricing problem in which a representative agent is ambiguous about the aggregate endowment growth rate and trades a risky stock, human capital, and a risk-free asset to maximize her preference value of consumption…

We study competitive equilibrium in the canonical Fisher market model, but with indivisible goods. In this model, every agent has a budget of artificial currency with which to purchase bundles of goods. Equilibrium prices match between…

The price-bubble and crash process formation is theoretically investigated in a two-asset equilibrium model. Sufficient and necessary conditions are derived for the existence of average equilibrium price dynamics of different agent-based…

We study a generalization of the model of a dark market due to Duffie-G\^arleanu- Pedersen [6]. Our market is segmented and involves multiple assets. We show that this market has a unique asymptotically stable equilibrium. In order to…

We consider a market model that consists of financial investors and producers of a commodity. Producers optionally store some production for future sale and go short on forward contracts to hedge the uncertainty of the future commodity…

This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…

We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…

We investigate financial markets under model risk caused by uncertain volatilities. For this purpose we consider a financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of…