We use a mean-variance model to analyze the problem of decentralized portfolio management. We find the solution for the optimal portfolio allocation for a head trader operating in n different markets, which is called the optimal centralized portfolio. However, as there are many traders specialized in different markets, the solution to the problem of optimal decentralized allocation should be di...

We propose and analyze a continuous time stochastic differential game as a mathematical model for the liquidation of a financial position by a distressed trader facing a predator trading with looser time constraints. Temporary and permanent price impacts are used to model liquidity effects. We construct Nash equilibria by solving a system of coupled degenerate HJB equations and analyze the resu...

Agent-based simulations of financial markets have gained more and more acceptance among social scientists in the last decade, and the Santa Fe Artificial Stock Market (SFI-ASM) is a well-known one. We employed the Swarm and the concept of the MASS-Z to design the architecture of the MASS-S and implemented a multi-agent simulation system, called MASS-SF. In order to evaluate the system, we did f...

Noise traders as one of the key elements of the market play a significant role in determining the market volatilities, returns, and stock market mispricing. Hence, this study attempts to scrutinize the role of noise trading in capital asset pricing. Therefore, by using daily data, samples including 14105 data of 200 companies listed on stock exchange were selected and noise trading index was es...

This paper analyzes information acquisition in double auction markets and shows that for any finite information cost, if the number of traders and the units a trader is allowed to trade are sufficiently large, then an efficient equilibrium allocation fails to exist. For a large set of parameter values any equilibrium with positive volume of trade has the following properties. Ex ante identicall...

Noise is essential for the existence of a liquid market, and if noise traders are not present in the market, the trade volume will drop severely and an important aspect of the market philosophy will be lost. However, these noise traders bring noise to the market, and the existence of noise in prices indicates a temporary deviation in prices from their fundamental values. In particular, high-fre...

Existing traders support the required functions, such as the lookup and register of services. They are limited because they are restricted to a small number of services. This paper proposes solutions to the issues of persistency and query routing in the context of CORBA Trader to improve the performance of the core trader functions. We propose appropriate wrappers that provide database-like int...

This monograph is a compact introduction to empirical research on market efficiency, behavioral finance, and fundamental analysis. The first section reviews the evolution of academic thinking on market efficiency. Section 2 introduces the noise trader model as an alternative framework for market-related research. Section 3 surveys the growing literature on the causes and consequences of investo...

This paper is a contribution to the pricing and hedging of options in a market where the volatility is stochastic. The new concept of relative indifference pricing is further developed. This relative price is the price at which an option trader is indifferent to trade in an additional option, given that he is currently holding and dynamically hedging a portfolio of options. We find that the app...

In this paper, we combine modern portfolio theory and option pricing so that a trader taking position in European contract, the underlying assets, risk-free bond can constru...