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Evolutionary finance: A model with endogenous asset payoffs

Author

Listed:
  • Igor V. Evstigneev

    (University of Manchester - Economics, School of Social Sciences)

  • Thorsten Hens

    (University of Zurich - Department of Banking and Finance; Norwegian School of Economics and Business Administration (NHH); Swiss Finance Institute)

  • Mohammad Javad Vanaei

    (University of Manchester)

Abstract

Evolutionary Finance (EF) explores financial markets as evolving biological systems. Investors pursuing diverse investment strategies compete for the market capital. Some "survive" and some "become extinct". A central goal is to identify evolutionary stable (in one sense or another) investment strategies. The problem is analyzed in a framework combining stochastic dynamics and evolutionary game theory. Most of the models currently considered in EF assume that asset payo¤s are exogenous and depend only on the underlying stochastic process of states of the world. The present work develops a model where the payo¤s are endogenous: they depend on the share of total market wealth invested in the asset.

Suggested Citation

  • Igor V. Evstigneev & Thorsten Hens & Mohammad Javad Vanaei, 2022. "Evolutionary finance: A model with endogenous asset payoffs," Swiss Finance Institute Research Paper Series 22-96, Swiss Finance Institute, revised May 2023.
    • Handle: RePEc:chf:rpseri:rp2296
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4308736
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    Cited by:

    1. Chunsheng Wang & Jiatong Weng & Jingshi He & Xiaopin Wang & Hong Ding & Quanxin Zhu, 2024. "Stability Analysis of the Credit Market in Supply Chain Finance Based on Stochastic Evolutionary Game Theory," Mathematics, MDPI, vol. 12(11), pages 1-16, June.

    More about this item

    Keywords

    Evolutionary Finance; endogenous asset payoffs;

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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