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Johannes Muhle-Karbe (Carnegie Mellon Univ. Pittsburgh)

Equilibrium Asset Pricing with Transaction Costs (joint work with Martin Herdegen)

Venue: Sky Lounge OMP1

Monday, 08.01.2018

We consider a risk-sharing equilibrium where trading is subject to quadratic transaction costs. In this context, equilibrium asset prices can be characterized by coupled systems of quadratic forward-backward SDEs. Some concrete examples can be solved explicitly, allowing to assess the impact of liquidity on volatility and trading volume.

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Institut für Statistik und Operations Research
University of Vienna

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