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Price impact in Nash equilibria

Author

Listed:
  • Xiao Chen

    (Rutgers University)

  • Jin Hyuk Choi

    (Ulsan National Institute of Science and Technology (UNIST))

  • Kasper Larsen

    (Rutgers University)

  • Duane J. Seppi

    (Carnegie Mellon University)

Abstract

We prove global existence of a continuous-time Nash equilibrium with endogenous persistent and exogenous temporary price impact. Relative to the analogous Radner and Pareto-efficient equilibria, the Nash equilibrium has a lower interest rate but has similar Sharpe ratios and stock-return volatility.

Suggested Citation

  • Xiao Chen & Jin Hyuk Choi & Kasper Larsen & Duane J. Seppi, 2023. "Price impact in Nash equilibria," Finance and Stochastics, Springer, vol. 27(2), pages 305-340, April.
    • Handle: RePEc:spr:finsto:v:27:y:2023:i:2:d:10.1007_s00780-023-00499-w
    DOI: 10.1007/s00780-023-00499-w
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    More about this item

    Keywords

    Asset pricing; Price impact; Nash equilibrium; Radner equilibrium; Pareto-efficient equilibrium;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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