Equilibrium Pricing of Securities in the Co-presence of Cooperative and Non-cooperative Populations

Masaaki Fujii
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Masaaki Fujii: Quantitative Finance Course, Graduate School of Economics, The University of Tokyo

No CARF-F-545, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: In this work, we develop an equilibrium model for price formation of securities in a market composed of two populations of different types: the first one consists of cooperative agents, while the other one consists of non-cooperative agents. The trading of every cooperative member is assumed to be coordinated by a central planner. In the large population limit, the problem for the central planner is shown to be a conditional extended mean-field control. In addition to the convexity assumptions, if the relative size of the cooperative population is small enough, then we are able to show the existence of a unique equilibrium for both the finite-agent and the mean-field models. The strong convergence to the mean-field model is also proved under the same conditions.

Pages: 39
Date: 2022-09
New Economics Papers: this item is included in nep-hme
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