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Pricing, liquidity and the control of dynamic systems in finance and economics

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  • Geoff Willis

Abstract

The paper discusses various practical consequences of treating economics and finance as an inherently dynamic and chaotic system. On the theoretical side this looks at the general applicability of the market-making pricing approach to economics in general. The paper also discuses the consequences of the endogenous creation of liquidity and the role of liquidity as a state variable. On the practical side, proposals are made for reducing chaotic behaviour in both housing markets and stock markets.

Suggested Citation

  • Geoff Willis, 2011. "Pricing, liquidity and the control of dynamic systems in finance and economics," Papers 1105.5503, arXiv.org.
    • Handle: RePEc:arx:papers:1105.5503
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G1 - Financial Economics - - General Financial Markets
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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