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A partial stochastic equilibrium model and its limiting behaviour

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  • Alessandro Prosperi

Abstract

The existence of a (partial) market equilibrium price is proved in a complete, continuous time finite-agent market setting. The economic agents act as price takers in a fully competitive setting and maximize exponential utility from terminal wealth. As the number $N$ of economic agents goes to infinity, the BSDE system of $N$ equations characterizing the equilibrium asset price dynamics decouples. Due to the system's symmetry, the influence of the mean field of the agents, conditionally on the common noise, becomes deterministic.

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  • Alessandro Prosperi, 2022. "A partial stochastic equilibrium model and its limiting behaviour," Papers 2211.17231, arXiv.org.
    • Handle: RePEc:arx:papers:2211.17231
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    1. Xing, Hao & Žitković, Gordan, 2018. "A class of globally solvable Markovian quadratic BSDE systems and applications," LSE Research Online Documents on Economics 73440, London School of Economics and Political Science, LSE Library.
    2. Briand, Philippe & Elie, Romuald, 2013. "A simple constructive approach to quadratic BSDEs with or without delay," Stochastic Processes and their Applications, Elsevier, vol. 123(8), pages 2921-2939.
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