EconPapers    
Economics at your fingertips  
 

A Mean Field Game Approach to Equilibrium Pricing with Market Clearing Condition

Masaaki Fujii and Akihiko Takahashi
Additional contact information
Masaaki Fujii: Quantitative Finance Course, Graduate School of Economics, The University of Tokyo
Akihiko Takahashi: Quantitative Finance Course, Graduate School of Economics, The University of Tokyo

No CARF-F-473, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: In this work, we study an equilibrium-based continuous asset pricing problem which seeks to form a price process endogenously by requiring it to balance the flow of sales-and-purchase orders in the exchange market, where a large number of agents 1 ≤ i ≤ N are interacting through the market price. Adopting a mean fild game (MFG) approach, we find a special form of forward-backward stochastic differential equations of McKean-Vlasov type with common noise whose solution provides a good approximate of the market price. We show the convergence of the net order flow to zero in the large N-limit and get the order of convergence in N under some conditions. We also extend the model to a setup with multiple populations where the agents within each population share the same cost and coefficient functions but they can be different population by population.

Pages: 27
Date: 2020-03
New Economics Papers: this item is included in nep-gth
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
https://www.carf.e.u-tokyo.ac.jp/admin/wp-content/uploads/2020/03/F473.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cfi:fseres:cf473

Access Statistics for this paper

More papers in CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2021-10-24
Handle: RePEc:cfi:fseres:cf473