On the strategic origin of Brownian motion in finance

Bernard De Meyer and Hadiza Moussa Saley

No 2000057, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper is concerned with the stategic use of a private information on the stock market. A repeated auction model is used to analyze the evolution of the price system on a market with asymmetric information. The model turns out to be a zero-sum repeated game with one-sided information, as introduced by Aumann and Maschler. The stochastic evolution of the price system can be explicitly computed in the n times repeated case. As n grows to [infinite] , this process tends to a continuous time martingale related to a Brownian Motion. This paper provides in this way an endogenous justification for the appearance of Brownian Motion in Finance theory.

Date: 2000-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://sites.uclouvain.be/core/publications/coredp/coredp2000.html (text/html)

Related works:
Journal Article: On the strategic origin of Brownian motion in finance (2003)
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:cor:louvco:2000057

Access Statistics for this paper

More papers in LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Alain GILLIS ().