Related papers: Price Levels in Heterogeneous-Agent Models
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
We propose a simple market model where agents trade different types of products with each other by using money, relying only on local information. Value fluctuations of single products, combined with the condition of maximum profit in…
In this discussion draft, we explore heterogeneous oligopoly games of increasing players with quadratic costs, where the market is supposed to have the isoelastic demand. For each of the models considered in this draft, we analytically…
Financial contagion has been widely recognized as a fundamental risk to the financial system. Particularly potent is price-mediated contagion, wherein forced liquidations by firms depress asset prices and propagate financial stress,…
The Walras approach to equilibrium focuses on the existence of market prices at which the total demands for goods are matched by the total supplies. Trading activities that might identify such prices by bringing agents together as potential…
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…
Wage dispersion and job-to-job mobility are central features of modern labour markets, yet canonical equilibrium search models with exogenous job-offer ladders struggle to jointly account for these facts and the magnitude of frictional wage…
We consider a stochastic game between three types of players: an inside trader, noise traders and a market maker. In a similar fashion to Kyle's model, we assume that the insider first chooses the size of her market-order and then the…
This paper pioneers a novel approach to economic and public policy analysis by leveraging multiple Large Language Models (LLMs) as heterogeneous artificial economic agents. We first evaluate five LLMs' economic decision-making capabilities…
The mean field games (MFG) paradigm was introduced to provide tractable approximations of games involving very large populations. The theory typically rests on two key assumptions: homogeneity, meaning that all players share the same…
We consider the fundamental theorem of asset pricing (FTAP) and hedging prices of options under non-dominated model uncertainty and portfolio constrains in discrete time. We first show that no arbitrage holds if and only if there exists…
We investigate the effects of the social interactions of a finite set of agents on an equilibrium pricing mechanism. A derivative written on non-tradable underlyings is introduced to the market and priced in an equilibrium framework by…
Volatility, as a primary indicator of financial risk, forms the foundation of classical frameworks such as Markowitz's Portfolio Theory and the Efficient Market Hypothesis (EMH). However, its conventional use rests on assumptions-most…
Here, we study machine learning (ML) architectures to solve a mean-field games (MFGs) system arising in price formation models. We formulate a training process that relies on a min-max characterization of the optimal control and price…
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…
This paper introduces unit-specific heterogeneity in panel data threshold regression. We develop the asymptotic theory for models with heterogeneous thresholds, heterogeneous slope coefficients, and interactive fixed effects. The estimation…
Hierarchical analysis is considered and a multilevel model is presented in order to explore causality, chance and complexity in financial economics. A coupled system of models is used to describe multilevel interactions, consistent with…
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
We present a market-based approach to the Air Traffic Flow Management (ATFM) problem. The goods in our market are delays and buyers are airline companies; the latter pay money to the FAA to buy away the desired amount of delay on a per…
The stability of money value is an important requisite for a functioning economy, yet it critically depends on the actions of participants in the market themselves. Here we model the value of money as a dynamical variable that results from…