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The author studies the behavior of the weak solutions to the system of stochastic differential equations \[ \mathrm{d} X_i(t) = \mu(F_{\gamma^N(t)}(X_i(t)))\,\mathrm{d} t + \sigma(F_{\gamma^N(t)}(X_i(t))) \,\mathrm{d} B_i(t), \qquad i=1,\dotsc,N, \] on an interval \([0,T]\) as \(N\to\infty\), where \(\gamma^N(t):=\frac{1}{N}\sum_{i=1}^N \delta_{X_i(t)}\) is the empirical measure of the particle system \(X_1(t),\dotsc,X_N(t)\) at time \(t\), \(F_{\gamma^N(t)}\) is its cumulative distribution function, \(\mu\) and \(\sigma\) are measurable functions on \([0,1]\) taking values in \(\mathbb{R}\) and \((0,\infty)\), respectively, and \(B_1,\dotsc, B_N\) are independent standard Brownian motions. Informally, at any time \(t\) the drift and the diffusion coefficients of a fixed particle \(i\) are determined by its rank in the particle configuration \(X_1(t),\dotsc,X_N(t)\) at time \(t\), so, whenever a particle changes its rank, the coefficients change accordingly. Existence and uniqueness of a weak solution to this system for any fixed natural number \(N\) are essentially due to \textit{R. F. Bass} and \textit{E. Pardoux} [Probab. Theory Relat. Fields 76, 557--572 (1987; Zbl 0617.60075)]. Considering the above equation as an equation for the evolution of the empirical measure \(\gamma^N(t)\) of the particle system on \([0,T]\), the author proves that, under suitable assumptions on \(\mu\) and \(\sigma\), and the stationarity assumption on the initial vector of spacings between the particles, the limiting evolution is governed by a McKlean-Vlasov evolution equation. Moreover, it was shown that, under the same assumptions, the cumulative distribution function of the system evolves according the generalized porous medium equation with convention. Possible applications of the results for rank-based models of capital distributions in financial markets are also explained. | |||
Property / review text: The author studies the behavior of the weak solutions to the system of stochastic differential equations \[ \mathrm{d} X_i(t) = \mu(F_{\gamma^N(t)}(X_i(t)))\,\mathrm{d} t + \sigma(F_{\gamma^N(t)}(X_i(t))) \,\mathrm{d} B_i(t), \qquad i=1,\dotsc,N, \] on an interval \([0,T]\) as \(N\to\infty\), where \(\gamma^N(t):=\frac{1}{N}\sum_{i=1}^N \delta_{X_i(t)}\) is the empirical measure of the particle system \(X_1(t),\dotsc,X_N(t)\) at time \(t\), \(F_{\gamma^N(t)}\) is its cumulative distribution function, \(\mu\) and \(\sigma\) are measurable functions on \([0,1]\) taking values in \(\mathbb{R}\) and \((0,\infty)\), respectively, and \(B_1,\dotsc, B_N\) are independent standard Brownian motions. Informally, at any time \(t\) the drift and the diffusion coefficients of a fixed particle \(i\) are determined by its rank in the particle configuration \(X_1(t),\dotsc,X_N(t)\) at time \(t\), so, whenever a particle changes its rank, the coefficients change accordingly. Existence and uniqueness of a weak solution to this system for any fixed natural number \(N\) are essentially due to \textit{R. F. Bass} and \textit{E. Pardoux} [Probab. Theory Relat. Fields 76, 557--572 (1987; Zbl 0617.60075)]. Considering the above equation as an equation for the evolution of the empirical measure \(\gamma^N(t)\) of the particle system on \([0,T]\), the author proves that, under suitable assumptions on \(\mu\) and \(\sigma\), and the stationarity assumption on the initial vector of spacings between the particles, the limiting evolution is governed by a McKlean-Vlasov evolution equation. Moreover, it was shown that, under the same assumptions, the cumulative distribution function of the system evolves according the generalized porous medium equation with convention. Possible applications of the results for rank-based models of capital distributions in financial markets are also explained. / rank | |||
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Property / reviewed by | |||
Property / reviewed by: Mátyás Barczy / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 60J60 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 60K35 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 65C30 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 82C22 / rank | |||
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Property / zbMATH DE Number | |||
Property / zbMATH DE Number: 6040301 / rank | |||
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Property / zbMATH Keywords | |||
diffusion process | |||
Property / zbMATH Keywords: diffusion process / rank | |||
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Property / zbMATH Keywords | |||
McKlean-Vlasov equation | |||
Property / zbMATH Keywords: McKlean-Vlasov equation / rank | |||
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porous medium equation | |||
Property / zbMATH Keywords: porous medium equation / rank | |||
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Property / zbMATH Keywords | |||
particle method | |||
Property / zbMATH Keywords: particle method / rank | |||
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rank-based market model | |||
Property / zbMATH Keywords: rank-based market model / rank | |||
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Property / MaRDI profile type | |||
Property / MaRDI profile type: MaRDI publication profile / rank | |||
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Property / OpenAlex ID | |||
Property / OpenAlex ID: W2083051656 / rank | |||
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Property / arXiv ID | |||
Property / arXiv ID: 1008.4611 / rank | |||
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links / mardi / name | links / mardi / name | ||
Latest revision as of 07:39, 5 July 2024
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English | Large systems of diffusions interacting through their ranks |
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Large systems of diffusions interacting through their ranks (English)
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1 June 2012
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The author studies the behavior of the weak solutions to the system of stochastic differential equations \[ \mathrm{d} X_i(t) = \mu(F_{\gamma^N(t)}(X_i(t)))\,\mathrm{d} t + \sigma(F_{\gamma^N(t)}(X_i(t))) \,\mathrm{d} B_i(t), \qquad i=1,\dotsc,N, \] on an interval \([0,T]\) as \(N\to\infty\), where \(\gamma^N(t):=\frac{1}{N}\sum_{i=1}^N \delta_{X_i(t)}\) is the empirical measure of the particle system \(X_1(t),\dotsc,X_N(t)\) at time \(t\), \(F_{\gamma^N(t)}\) is its cumulative distribution function, \(\mu\) and \(\sigma\) are measurable functions on \([0,1]\) taking values in \(\mathbb{R}\) and \((0,\infty)\), respectively, and \(B_1,\dotsc, B_N\) are independent standard Brownian motions. Informally, at any time \(t\) the drift and the diffusion coefficients of a fixed particle \(i\) are determined by its rank in the particle configuration \(X_1(t),\dotsc,X_N(t)\) at time \(t\), so, whenever a particle changes its rank, the coefficients change accordingly. Existence and uniqueness of a weak solution to this system for any fixed natural number \(N\) are essentially due to \textit{R. F. Bass} and \textit{E. Pardoux} [Probab. Theory Relat. Fields 76, 557--572 (1987; Zbl 0617.60075)]. Considering the above equation as an equation for the evolution of the empirical measure \(\gamma^N(t)\) of the particle system on \([0,T]\), the author proves that, under suitable assumptions on \(\mu\) and \(\sigma\), and the stationarity assumption on the initial vector of spacings between the particles, the limiting evolution is governed by a McKlean-Vlasov evolution equation. Moreover, it was shown that, under the same assumptions, the cumulative distribution function of the system evolves according the generalized porous medium equation with convention. Possible applications of the results for rank-based models of capital distributions in financial markets are also explained.
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diffusion process
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McKlean-Vlasov equation
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porous medium equation
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particle method
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rank-based market model
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