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Newtonian Asset Pricing

Author

Listed:
  • Sasaki, D.

Abstract

This paper explores a pricing algorithm which behaves as a Walrasian auctioneer under the following constraints: [i] traders arrive randomly and each sales/purchase order should be carried out at the currently posted price (sequential service), [ii] the auctioneer need not know the exact fundamental value of the traded asset (s), and [iii] price movements depend only upon trade orders, not upon which traders submit these orders (anonymous traders). The suggested auctioneering algorithm is such that the arrivals of sales and purchase orders affect the second-order increment (acceleration), not directly the first-order increment (velocity), of the price.

Suggested Citation

  • Sasaki, D., 1999. "Newtonian Asset Pricing," Department of Economics - Working Papers Series 711, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:711
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    More about this item

    Keywords

    FINANCIAL MARKET ; INFORMATION ; PRICES;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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