Equilibrium in thin security markets under restricted participation

19 Aug 2019  ·  Anthropelos Michail, Kardaras Constantinos ·

We consider a market of financial securities with restricted participation, in which traders may not have access to the trade of all securities. The market is assumed thin: traders may influence the market and strategically trade against their price impacts... We prove existence and uniqueness of the equilibrium even when traders are heterogeneous with respect to their beliefs and risk tolerance. An efficient algorithm is provided to numerically obtain the equilibrium prices and allocations given market's inputs. read more

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