From small markets to big markets

DOI10.4064/BC122-3zbMATH Open1460.91286arXiv1907.05593OpenAlexW3129946352MaRDI QIDQ4989142FDOQ4989142

Authors: Miklós Rásonyi, Laurence Carassus 

Publication date: 20 May 2021

Published in: Banach Center Publications (Search for Journal in Brave)

Abstract: We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising expected utility in this setting. Besides establishing the existence of optimizers under weaker assumptions than previous papers, we go on studying the relationship between optimal investments in finite market segments and those in the whole market. We show that certain natural (but nontrivial) continuity rules hold: maximal satisfaction, reservation prices and (convex combinations of) optimizers computed in small markets converge to their respective counterparts in the big market.

Full work available at URL: https://arxiv.org/abs/1907.05593

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Mathematics Subject Classification ID

Portfolio theory (91G10) Financial networks (including contagion, systemic risk, regulation) (91G45)

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Cited In (6)

• The large and the small -- who exploits whom?
• Discussion: Making Progress in a Crowded Market
• On the measurement of financial market integration
• Open markets
• Exact arbitrage and portfolio analysis in large asset markets
• Pricing of contingent claims in large markets

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