401-4935-63L  Equilibrium Models in Financial Economics

Semester Autumn Semester 2015
Lecturers M. P. G. Herdegen
Periodicity non-recurring course
Language of instruction English

Abstract In Mathematical Finance, asset prices are typically assumed to be given exogenously. This leads to tractable models that are well-suited to study the behaviour of individual agents. However, policy regulations like the introduction of a transaction tax influence the whole market. To study their impact, one has to turn to models where prices are determined endogenously in equilibrium.
Objective Introduction to equilibrium models:
1) Understand the conceptual ideas.
2) Learn about the technical tools.
3) Gain an overview over the problems that can be studied and solutions that can be obtained using equilibrium models.
Content This course provides an introduction to the equilibrium models prevalent in Financial Economics. We will start by studying optimisation problems for individual investors, and then move towards equilibrium prices, determined so that supply matches demand. The initial focus will be on conceptual issues in simple one-period models, before moving to more general settings in continuous time.
Lecture notes No.
Literature Will be pointed out in the lecture.
Prerequisites / Notice Brownian Motion and Stochastic Calculus, Introduction to Mathematical Finance or Mathematical Foundations for Finance