Liquidity Based Modeling of Asset Price Bubbles via Random Matching

Biagini, Francesca ; Mazzon, Andrea; Meyer-Brandis, Thilo und Oberpriller, Katharina (2023): Liquidity Based Modeling of Asset Price Bubbles via Random Matching. In: SIAM Journal on Financial Mathematics, Bd. 14, Nr. 4: S. 1304-1342

Abstract

In this paper we study the evolution of asset price bubbles driven by contagion effects spreading among investors via a random matching mechanism in a discrete-time version of the liquidity based model of [R. A. Jarrow, P. Protter, and A. F. Roch, Quant. Finance, 12 (2012), pp. 1339–1349]. To this scope, we extend the Markov conditionally independent dynamic directed random matching of [D. Duffie, L. Qiao, and Y. Sun, J. Econ. Theory, 174 (2018), pp. 124–183] to a stochastic setting to include stochastic exogenous factors in the model. We derive conditions guaranteeing that the financial market model is arbitrage-free and present some numerical simulation illustrating our approach.

• Dokumententyp: Zeitschriftenartikel
• Fakultät: Mathematik, Informatik und Statistik > Mathematik > Finanz- und Versicherungsmathematik
• Themengebiete: 500 Naturwissenschaften und Mathematik > 510 Mathematik
• ISSN: 1945-497X
• Sprache: Englisch