Mathematical Finance and Probability Seminars

Resolving Asset Pricing Puzzles with Price Impact

Tuesday, November 19, 2019 at 11:50am - 12:50pm

Xiao Chen- Rutgers University

We solve in closed-form a Nash equilibrium model in which a finite number of exponential investors trade continuously with price-impact over a finite time horizon. By comparing our continuous-time Nash equilibrium model to the otherwise identical  competitive Radner equilibrium model, we show that our Nash equilibrium model with price-impact can simultaneously help resolve the interest rate puzzle, the equity premium puzzle, and the stock volatility puzzle. Joint work with Jin Hyuk Choi, Kasper Larsen, and Duane J. Seppi.
Location   Hill 425