Search

This paper proposes a simple descriptive model of discrete-time double auction markets for divisible assets. As in the classical models of exchange economies, we consider a finite set of agents described by their initial endowments and preferences. Instead of the classical Walrasian-type market models, however, we assume that all trades take place in a centralized double auction where the agents communicate through sealed limit orders for buying and selling. We find that, under nonstrategic bidding, double auction clears with zero trades precisely when the agents' current holdings are on the Pareto frontier. More interestingly, the double auctions implement Adam Smith's "invisible hand" in the sense that, when starting from disequilibrium, repeated double auctions lead to a sequence of allocations that converges to individually rational Pareto allocations. [ABSTRACT FROM AUTHOR]

We consider an economy where agents' consumption sets are given by the cone L0+ of nonnegative measurable functions and whose preferences are defined by additive utilities satisfying the Inada conditions. We extend to this setting the results of Dana [J. Math. Econom., 22 (1993), pp. 563-579; Econometrica, 61 (1993), pp. 953-957] on the existence and uniqueness of Arrow-Debreu equilibria. In the case of existence, our conditions are necessary and sufficient. [ABSTRACT FROM AUTHOR]

We consider an economy where agents' consumption sets are given by the cone L0+ of nonnegative measurable functions and whose preferences are defined by additive utilities satisfying the Inada conditions. We extend to this setting the results of Dana [J. Math. Econom., 22 (1993), pp. 563-579; Econometrica, 61 (1993), pp. 953-957] on the existence and uniqueness of Arrow-Debreu equilibria. In the case of existence, our conditions are necessary and sufficient. [ABSTRACT FROM AUTHOR]

We develop a single-period model for a large economic agent who trades with market makers at their utility indifference prices. We compute the sensitivities of these market indifference prices with respect to the size of the investor's order. It turns out that the price impact of an order is determined both by the market makers' joint risk tolerance and by the variation of individual risk tolerances. On a technical level, a key role in our analysis is played by a pair of conjugate saddle functions associated with the description of Pareto optimal allocations in terms of the aggregate utility function. [ABSTRACT FROM AUTHOR]

Abstract: We provide sufficient conditions for the existence and uniqueness of solutions to a stochastic differential equation which arises in the price impact model developed by Bank and Kramkov (2011) [1,2]. These conditions are stated as smoothness and boundedness requirements on utility functions or Malliavin differentiability of payoffs and endowments. [Copyright &y& Elsevier]