2024/06/04 by Masaaki Fujii, Masashi Sekine, Fujii, Masaaki +1 · 2 citations
Economics, Econometrics and Finance · #49N80 #60H10 #91B51 #Complex Systems and Time Series Analysis #FOS: Economics and business #Mathematical Finance (q-fin.MF) #Pricing of Securities (q-fin.PR) #Stochastic processes and financial applications #Trading and Market Microstructure (q-fin.TR)
paper · pdf · doi:10.48550/arxiv.2406.02155
openalex publication_date 2024/06/04 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
This paper presents an asset pricing model in an incomplete market involving a large number of heterogeneous agents based on the mean field game theory. In the model, we incorporate habit formation in consumption preferences, which has been widely used to explain various phenomena in financial economics. In order to characterize the market-clearing equilibrium, we derive a quadratic-growth mean field backward stochastic differential equation (BSDE) and study its well-posedness and asymptotic behavior in the large population limit. Additionally, we introduce an exponential quadratic Gaussian reformulation of the asset pricing model, in which the solution is obtained in a semi-analytic form.