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

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  • Masaaki Fujii

    (Quantitative Finance Course, Graduate School 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.

Suggested Citation

  • Masaaki Fujii, 2022. "Equilibrium Pricing of Securities in the Co-presence of Cooperative and Non-cooperative Populations," CARF F-Series CARF-F-545, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf545
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    References listed on IDEAS

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    8. Masaaki Fujii & Akihiko Takahashi, 2021. "Equilibrium Price Formation with a Major Player and its Mean Field Limit," Papers 2102.10756, arXiv.org, revised Feb 2022.
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    Cited by:

    1. David Evangelista & Yuri Thamsten, 2023. "Approximately optimal trade execution strategies under fast mean-reversion," Papers 2307.07024, arXiv.org, revised Aug 2023.

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