Date
Thu, 11 May 2017
Time
16:00 - 17:30
Location
L4
Speaker
Martin Herdegen
Organisation
Warwick


We study risk-sharing equilibria with trading subject to small proportional transaction costs. We show that the frictionless equilibrium prices also form an "asymptotic equilibrium" in the small-cost limit. To wit, there exist asymptotically optimal policies for all agents and a split of the trading cost according to their risk aversions for which the frictionless equilibrium prices still clear the market. Starting from a frictionless equilibrium, this allows to study the interplay of volatility, liquidity, and trading volume.
(This is joint work with Johannes Muhle-Karbe, University of Michigan.)
 

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