Related papers: Resolving asset pricing puzzles using price-impact
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…
In this research, we have empirically investigated the key drivers affecting liquidity in equity markets. We illustrated how theoretical models, such as Kyle's model, of agents' interplay in the financial markets, are aligned with the…
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…
In this paper, we revisit the equity premium puzzle reported in 1985 by Mehra and Prescott. We show that the large equity premium that they report can be explained by choosing a more appropriate distribution for the return data. We…
In a financial exchange, market impact is a measure of the price change of an asset following a transaction. This is an important element of market microstructure, which determines the behaviour of the market following a trade. In this…
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)…
We study a multiplicative transient price impact model for an illiquid financial market, where trading causes price impact which is multiplicative in relation to the current price, transient over time with finite rate of resilience, and…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
We present a methodology for representing probabilistic relationships in a general-equilibrium economic model. Specifically, we define a precise mapping from a Bayesian network with binary nodes to a market price system where consumers and…
The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…
In this paper we present an interacting-agent model of stock markets. We describe a stock market through an Ising-like model in order to formulate the tendency of traders getting to be influenced by the other traders' investment attitudes…
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 develop a market model in which products generate state-dependent potential hidden charges. Firms differ in their ability to realize this potential. Unlike firms, consumers do not observe the state. They try to infer hidden charges from…
We study the optimal liquidation problem in a market model where the bid price follows a geometric pure jump process whose local characteristics are driven by an unobservable finite-state Markov chain and by the liquidation rate. This model…
We study the problem of determination of asset prices in an incomplete market proposing three different but related scenarios. One scenario uses a market game approach whereas the other two are based on risk sharing or regret minimizing…
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…
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 thesis develops equilibrium asset pricing models in incomplete markets with a large number of heterogeneous agents using mean field game theory. The market equilibrium is characterized by a novel form of mean field backward stochastic…
The impact of trades on asset prices is a crucial aspect of market dynamics for academics, regulators and practitioners alike. Recently, universal and highly nonlinear master curves were observed for price impacts aggregated on all…
Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…