From small markets to big markets

DOI10.4064/BC122-3MaRDI QIDQ4989142zbMATH OpenOpenAlexFDO

Authors Miklós Rásonyi, Laurence Carassus

Publication date 20 May 2021

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

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

Mathematics Subject Classification ID

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

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.

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Cites work

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• scientific article; zbMATH DE number 3106184 (Why is no real title available?)
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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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