Wednesday, October 8, 2014

Securitization and equilibrium pricing under relative performance concerns

Gonçalo Reis
(School of Mathematics, University of Edinburgh, UK)

Abstract: We investigate the effects of a finite set of agents interacting socially in an equilibrium pricing mechanism. A derivative written on non-tradable underlyings is introduced to the market and priced in an equilibrium framework by agents who assess risk using convex dynamic risk measures expressed by Backward Stochastic Differential Equations (BSDE). An agent is not only exposed to financial and non-financial risk factors, but he also faces performance concerns with respect to the other agents. The equilibrium analysis leads to systems of fully coupled multi-dimensional quadratic BSDEs.

Wednesday, October 8, 2014
Time: 11h00
Room: Sala Unicre, Edificio Quelhas, ISEG