Related papers: Multi-Asset Bubbles Equilibrium Price Dynamics
The price clustering phenomenon manifesting itself as an increased occurrence of specific prices is widely observed and well-documented for various financial instruments and markets. In the literature, however, it is rarely incorporated…
This paper analyzes the role of money in asset markets characterized by search frictions. We develop a dynamic framework that brings together a model for illiquid financial assets `a la Duffie, Garleanu, and Pedersen, and a search-theoretic…
In this article, we consider the problem of equilibrium price formation in an incomplete securities market consisting of one major financial firm and a large number of minor firms. They carry out continuous trading via the securities…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…
In an incomplete semimartingale model of a financial market, we consider several risk-averse financial agents who negotiate the price of a bundle of contingent claims. Assuming that the agents' risk preferences are modelled by convex…
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…
Existing approaches to asset-pricing under model-uncertainty adapt classical utility-maximization frameworks and seek theoretical comprehensiveness. We move toward practice by considering binary model-risks and by emphasizing 'constraints'…
Quasi-equilibrium models for aggregate variables are widely-used throughout finance and economics. The validity of such models depends crucially upon assuming that the systems' participants behave both independently and in a Markovian…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
This paper examines a heterogeneous beliefs model in which there is a process that is only partially observed by the agents. The economy contains a risky asset producing dividends continuously in time. The dividends are observed by the…
We seek to deepen understanding of the micro-foundations of institutionalization while contributing to a sociological theory of markets by investigating the puzzle of price bubbles in financial markets. We find that such markets, despite…
The standard asset pricing models (the CCAPM and the Epstein-Zin non-expected utility model) counterintuitively predict that equilibrium asset prices can rise if the representative agent's risk aversion increases. If the income effect,…
We consider a tick-by-tick model of price formation, in which buy and sell orders are modeled as self-exciting point processes (Hawkes process), similar to the one in [Bacry, Delattre, Hoffmann, Muzy, Modelling microstructure noise with…
Agent-based models help explain stock price dynamics as emergent phenomena driven by interacting investors. In this modeling tradition, investor behavior has typically been captured by two distinct mechanisms -- learning and heterogeneous…
We consider the problem of maximizing portfolio value when an agent has a subjective view on asset value which differs from the traded market price. The agent's trades will have a price impact which affect the price at which the asset is…
We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…
Market-based coordination of demand side assets has gained great interests in recent years. In spite of its efficiency, there is a risk that the interaction between the dynamic assets through the price signal could result in an unstable…
We study an equilibrium-based continuous asset pricing problem for the securities market. In the previous work [16], we have shown that a certain price process, which is given by the solution to a forward backward stochastic differential…
Proving the existence of speculative financial bubbles even a posteriori has proven exceedingly difficult so anticipating a speculative bubble ex ante would at first seem an impossible task. Still as illustrated by the recent turmoil in…
The problem of investing into a cryptocurrency market requires good understanding of the processes that regulate the price of the currency. In this paper we offer a view of a cryptocurrency market as an environment for realization of a…