Events Calendar
Mar 9
14:00 - 16:00
CeQuFin Seminar - Professor Dan Crisan
CeQuFin Seminar
Asset pricing through competing traders valuations

The Centre for Quantitative Finance (CEQUFIN) organizes a series of research seminars attended by academics at Kent Business School and across the Faculty of Social Sciences. The aim of the seminar series is to foster a strong and dynamic research culture, as well as to develop a network for further research collaboration. The invited speakers vary from academics who present their cutting-edge research to practitioners and policy makers who highlight the practical implications of research in finance.

Seminar Topic:

Asset pricing through competing traders valuations


Professor Dan Crisan - Imperial College London

We consider a model of asset price determination by an infinite collection of competing traders. Each trader's valuations of the assets are given by the solution of a stochastic differential equation, and the infinite system of SDEs, assumed to be exchangeable, is coupled through a common noise process and through the asset prices. In the simplest, single asset setting, the market clearing price at any time t is given by a quantile of the de Finetti measure determined by the individual trader valuations. In the multi-asset setting, the prices are essentially given by the solution of an assignment game introduced by Shapley and Shubik.

Existence of solutions for the infinite exchangeable system is obtained by an approximation argument that requires the continuous dependence of the prices on the determining de Finetti measures which is ensured if the de Finetti measures charge every open set. The solution of the SPDE satisfied by the de Finetti measures can be interpreted as the conditional distribution of the solution of a single stochastic differential equation given the common noise and the price process. Under mild nondegeneracy conditions on the coefficients of the stochastic differential equation, the conditional distribution is shown to charge every open set, and under slightly stronger conditions, it is shown to be absolutely continuous with respect to Lebesgue measure with strictly positive density.

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Last Updated: 10/01/2012