In the setting of exponential investors and uncertainty governed by Brownian motions we first prove the existence of an incomplete equilibrium for a general class of models. We then introduce a tractable class of exponential-quadratic models and prove that the corresponding incomplete equilibrium is characterized by a …
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48 results for “incomplete equilibrium”
Existence of incomplete Radner equilibrium with endogenous noise tracker.
problem Existence of incomplete Radner equilibrium in a model with endogenous noise tracker.
method Proved existence through a coupled system of ODEs, reduced to two coupled ODEs.
result Endogenous noise tracker leads to higher aggregate welfare for large stock supply.
Investigates portfolio selection for rank-dependent utilities in incomplete markets.
problem Portfolio selection for agents with rank-dependent utility in incomplete financial markets.
method Characterizes deterministic strict equilibrium strategies for constant-coefficient and time-invariant probability weighting functions. Addresses the issue of selecting an optimal strategy from multiple equilibrium strategies for time-variant probability weighting functions.
result Characterizes deterministic strict equilibrium strategies and identifies optimal strategies from multiple equilibrium strategies.
We prove the global existence of an incomplete, continuous-time finite-agent Radner equilibrium in which exponential agents optimize their expected utility over both running consumption and terminal wealth. The market consists of a traded annuity, and, along with unspanned income, the market is incomplete. Set in a Bro…
Investor finds a fair outcome in complex financial markets.
problem Finding a fair outcome in complex financial markets.
method Recalled and proved the existence of personal equilibrium in a multistep, generically incomplete financial market model.
result Personal equilibrium exists in a multistep, generically incomplete financial market model under appropriate assumptions.
Study proves existence of equilibrium in incomplete economies with discontinuous volatility.
problem Existence of incomplete Radner equilibrium with nondegenerate endogenous volatility.
method Established existence of solution for Markovian quadratic BSDEs with discontinuous generators using unique continuation and backward uniqueness.
result Existence of incomplete Radner equilibrium with nondegenerate endogenous volatility.
Equilibrium Portfolio Selection under Utility-Variance Analysis of Log Returns in Incomplete Marketsq-fin.PM
The paper solves a portfolio selection problem in incomplete markets by balancing utility and risk.
problem Time-inconsistent portfolio selection in incomplete markets.
method Characterizes equilibrium via a coupled quadratic BSDE system, introduces approximate equilibrium for general cases.
result Established existence theory for equilibrium strategies in special and general cases.
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 heterogeneous exponential utility investors, who receive partially unspanned income …
We derive asset pricing formula for markets with incomplete information and subjective views.
problem Asset pricing in markets with informational imperfections and subjective investor beliefs.
method Closed-form market equilibrium formula based on Merton's model, non-linear system of equations, conditional posterior distribution.
result Derivation of market reference model for excess returns under random shadow-costs.
Self-Financing, Replicating Hedging Strategies, an incomplete thermodynamic analogycond-mat.stat-mech
In the theory of riskfree hedges in continuous time finance, one can start with the delta-hedge and derive the option pricing equation, or one can start with the replicating, self-financing hedging strategy and derive both the delta-hedge and the option pricing partial differential equation. Approximately reversible tr…
In this paper, we study a time-inconsistent consumption-investment problem with random endowments in a possibly incomplete market under general discount functions. We provide a necessary condition and a verification theorem for an open-loop equilibrium consumption-investment pair in terms of a coupled forward-backward …
We construct continuous-time equilibrium models based on a finite number of exponential utility investors. The investors' income rates as well as the stock's dividend rate are governed by discontinuous Levy processes. Our main result provides the equilibrium (i.e., bond and stock price dynamics) in closed-form. As an a…
We prove existence and uniqueness of stochastic equilibria in a class of incomplete continuous-time financial environments where the market participants are exponential utility maximizers with heterogeneous risk-aversion coefficients and general Markovian random endowments. The incompleteness featured in our setting - …
Study dynamic asset allocation in incomplete markets using game theory and nonlocal BSDEs.
problem Dynamic mean-variance asset allocation in general incomplete markets with non-exponential discounting.
method Game-theoretic approach, decomposition into myopic and hedging strategies, nonlocal BSDEs, fixed-point theorem.
result Well-posedness of solutions to BSDEs, existence of equilibrium control policy.
We consider two risk-averse financial agents who negotiate the price of an illiquid indivisible contingent claim in an incomplete semimartingale market environment. Under the assumption that the agents are exponential utility maximizers with non-traded random endowments, we provide necessary and sufficient conditions f…
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) and a non-traded underlying (e.g. temperature). The risk preferences are of expo…
Study on markets with insiders receiving private signals affecting asset prices and information flow.
problem Understanding markets with heterogeneous information flows and private signals.
method Proves existence of a partial communication equilibrium with jumps in information and prices.
result The public information flow and asset prices jump at each private signal time, creating incomplete markets between jumps.
This paper analyzes the equilibrium distribution of wealth in an economy where firms' productivities are subject to idiosyncratic shocks, returns on factors are determined in competitive markets, dynasties have linear consumption functions and government imposes taxes on capital and labour incomes and equally redistrib…
Study on price formation in a market with a major player and minor firms.
problem Equilibrium price formation in a market with a major financial firm and many minor firms.
method Analyzes the equilibrium price process in both finite and mean field models, considering idiosyncratic and common noises.
result Derives the functional form of price impact for the major firm in both market sizes.
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 capital requirements, we define and analyze their demand functions and propose a notio…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We argue that traders relatively more exposed to market risk tend to submit more elasti…
Develops asset pricing models with mean field game theory for heterogeneous agents.
problem Tackles equilibrium asset pricing in incomplete markets with heterogeneous agents.
method Uses mean field game theory and mean field backward stochastic differential equations (BSDEs).
result Derives equilibrium risk premium and shows market clearing in the large population limit.
The paper solves portfolio selection for complex preferences in continuous time.
problem Dynamic portfolio selection for nonlinear preferences with time inconsistency.
method Stochastic maximum principle and verification theorems for equilibrium strategies.
result Equilibrium strategies derived in closed form for CRRA and CARA preferences.
Study on price formation in financial markets with a single default event.
problem Equilibrium price formation in financial markets with a single default risk.
method Characterized optimal strategies using quadratic-growth BSDEs, derived market-clearing condition, and established mean-field BSDE solvability.
result Characterized equilibrium risk premium and its dependence on default risk factors.
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 presented. First, we derive arbitrage-free pricing rules based on hedging argumen…
We consider a power utility maximization problem with additive habits in a framework of discrete-time markets and random endowments. For certain classes of incomplete markets, we establish estimates for the optimal consumption stream in terms of the aggregate state price density, investigate the asymptotic behaviour of…
We offer mathematical tractability and new insights for a framework of exponential utility with non-negative consumption, a constraint often omitted in the literature giving rise to economically unviable solutions. Specifically, using the Kuhn-Tucker theorem and the notion of aggregate state price density (Malamud and …
Model asset pricing with habit formation in a large market.
problem Understanding asset pricing in large heterogeneous markets with habit formation.
method Mean field game theory and quadratic-growth mean field BSDEs.
result Derives a semi-analytic solution for asset pricing model.
In nonlinear state-space models, sequential learning about the hidden state can proceed by particle filtering when the density of the observation conditional on the state is available analytically (e.g. Gordon et al., 1993). This condition need not hold in complex environments, such as the incomplete-information equili…
Stochastic relaxational dynamics applied to finance: towards non-equilibrium option pricing theorycond-mat.stat-mech
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et al.) considers fluctuations around this equilibrium state by introducing a relaxati…
This paper focuses on the pricing of the variance swap in an incomplete market where the stochastic interest rate and the price of the stock are respectively driven by Cox-Ingersoll-Ross model and Heston model with simultaneous Lévy jumps. By using the equilibrium framework, we obtain the pricing kernel and the equival…
We propose a pricing technique based on coherent risk measures, which enables one to get finer price intervals than in the No Good Deals pricing. The main idea consists in splitting a liability into several parts and selling these parts to different agents. The technique is closely connected with the convolution of coh…
The paper studies an oligopolistic equilibrium model of financial agents who aim to share their random endowments. The risk-sharing securities and their prices are endogenously determined as the outcome of a strategic game played among all the participating agents. In the complete-market setting, each agent's set of st…
On curved spaces, viscous fluids reach equilibrium quickly.
problem Thermalization of viscous fluids on negatively curved manifolds.
method Stochastic Navier-Stokes equations with kinematically selected deformation Laplacian.
result Exponential thermalization rate of $2νλ_\Def$.
DaringFed incentivizes clients in OFL with dynamic rewards under TII.
problem Designing incentives for OFL clients under dynamic, incomplete information.
method Formulated as a dynamic signaling and pricing allocation problem in a Bayesian persuasion game.
result Optimal design of DaringFed improves accuracy and convergence speed by 16.99%.
-player and Mean-field Games in Itô-diffusion Markets with Competitive or Homophilous Interactionq-fin.MF
Study -player and mean-field games in Itô-diffusion markets with competitive or homophilous interactions.
problem Optimal portfolio choice in a common market with interacting players.
method Analyzes -player and mean-field games in incomplete and complete markets with CARA utilities and random risk tolerances.
result Derives explicit or closed-form solutions for equilibrium processes and game values.
This paper studies a 2-players zero-sum Dynkin game arising from pricing an option on an asset whose rate of return is unknown to both players. Using filtering techniques we first reduce the problem to a zero-sum Dynkin game on a bi-dimensional diffusion . Then we characterize the existence of a Nash equilibrium…
In this paper I empirically investigate prediction markets for binary options. Advocates of prediction markets have suggested that asset prices are consistent estimators of the "true" probability of a state of the world being realized. I test whether the market reaches a "consensus." I find little evidence for converge…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which changes with the regime. The market model is incomplete and there are two risky asset…
The study examines how alternative resource adequacy contract designs affect market participants' risk profiles and resource mix.
problem The tension between promoting reliability and competition in liberalized electricity markets.
method Constructs a stochastic equilibrium model of a competitive market with incomplete risk trading and computes investment equilibria under different contracting regimes.
result Alternative contracting regimes can induce different risk profiles and resource mixes, affecting market outcomes.
We study utility indifference prices and optimal purchasing quantities for a contingent claim, in an incomplete semi-martingale market, in the presence of vanishing hedging errors and/or risk aversion. Assuming that the average indifference price converges to a well defined limit, we prove that optimally taken position…
New method clusters strong and weak views effectively, improving performance by up to 40%.
problem Clustering incomplete multi-view data with unbalanced incompleteness.
method View evolution scheme and weighted multi-view subspace clustering.
result Improves clustering performance by up to 40% on three metrics.
MEP-Net uses MEP to generate solutions from limited data.
problem Generating solutions to scientific problems with incomplete information.
method Combines MEP with neural networks to learn complex distributions from moment constraints.
result Demonstrates MEP-Net's effectiveness in modeling biochemical reaction networks and generating complex distributions.
A \emph{new} notion of equilibrium, which we call \emph{strong equilibrium}, is introduced for time-inconsistent stopping problems in continuous time. Compared to the existing notions introduced in ArXiv: 1502.03998 and ArXiv: 1709.05181, which in this paper are called \emph{mild equilibrium} and \emph{weak equilibrium…
The noncompact Yamabe flow can lead to incomplete metrics over infinite time.
problem Incompleteness of noncompact Yamabe flow solutions over infinite time.
method Analysis of long-time behavior of the noncompact Yamabe flow.
result Existence of a long-time solution that is complete for each time but converges to an incomplete metric.
We introduce a new class of context dependent, incomplete information games to serve as structured prediction models for settings with significant strategic interactions. Our games map the input context to outcomes by first condensing the input into private player types that specify the utilities, weighted interactions…
New flow preserves singularities on incomplete manifolds.
problem Evolve incomplete manifolds with bounded curvature.
method Construct Ricci de Turck flow uniformly equivalent to initial metric.
result Any incomplete manifold can be evolved for a short time.
The possibility of statistical evaluation of the market completeness and incompleteness is investigated for continuous time diffusion stock market models. It is known that the market completeness is not a robust property: small random deviations of the coefficients convert a complete market model into a incomplete one.…