Equilibrium Price Formation with a Major Player and its Mean Field Limit

2021/02/22 by Masaaki Fujii, Fujii, Masaaki, Akihiko Takahashi +1 · 3 citations
Economics, Econometrics and Finance · #91A15 #91A16 #FOS: Economics and business #General Economics (econ.GN) #Mathematical Finance (q-fin.MF) #Trading and Market Microstructure (q-fin.TR) #econ.GN #msc:91A15 #msc:91A16 #q-fin.EC #q-fin.MF #q-fin.TR

paper · pdf · doi:10.48550/arxiv.2102.10756

revised. forthcoming in ESAIM: Control, Optimization and Calculus of Variations

arxiv created 2022/02/14 · arxiv updated 2022/02/15

Abstract

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 exchange to minimize their cost while facing idiosyncratic and common noises as well as stochastic order flows from their individual clients. The equilibrium price process that balances demand and supply of the securities, including the functional form of the price impact for the major firm, is derived endogenously both in the market of finite population size and in the corresponding mean field limit.

Cited by

• Mean-field model for pollution abatement via cap and trade mechanism
• Mean-Field Price Formation on Trees with a Network of Relative Performance Concerns
• Mean-Field Price Formation on Trees with Multi-Population and Non-Rational Agents
• Weak equilibria of a mean-field market model under asymmetric information

Related

• Equilibrium pricing of securities in the co-presence of cooperative and non-cooperative populations
• Price formation in financial markets: a game-theoretic perspective
• Mean-field equilibrium price formation under single-default risk
• A Mean Field Game Approach to Equilibrium Pricing with Market Clearing Condition
• A partial stochastic equilibrium model and its limiting behaviour