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Large systems of diffusions interacting through their ranks

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  • Shkolnikov, Mykhaylo

Abstract

We study the limiting behavior of the empirical measure of a system of diffusions interacting through their ranks when the number of diffusions tends to infinity. We prove that under certain assumptions the limiting dynamics is given by a McKean–Vlasov evolution equation. Moreover, we show that the evolution of the cumulative distribution function under the limiting dynamics is governed by the generalized porous medium equation with convection. The implications of the results for rank-based models of capital distributions in financial markets are also explained.

Suggested Citation

  • Shkolnikov, Mykhaylo, 2012. "Large systems of diffusions interacting through their ranks," Stochastic Processes and their Applications, Elsevier, vol. 122(4), pages 1730-1747.
  • Handle: RePEc:eee:spapps:v:122:y:2012:i:4:p:1730-1747 DOI: 10.1016/j.spa.2012.01.011
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    References listed on IDEAS

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    1. Tomoyuki Ichiba & Vassilios Papathanakos & Adrian Banner & Ioannis Karatzas & Robert Fernholz, 2009. "Hybrid Atlas models," Papers 0909.0065, arXiv.org, revised Apr 2011.
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    Cited by:

    1. Benjamin Jourdain & Julien Reygner, 2015. "Capital distribution and portfolio performance in the mean-field Atlas model," Annals of Finance, Springer, pages 151-198.
    2. Shkolnikov, Mykhaylo, 2013. "Large volatility-stabilized markets," Stochastic Processes and their Applications, Elsevier, pages 212-228.
    3. Benjamin Jourdain & Julien Reygner, 2015. "Capital distribution and portfolio performance in the mean-field Atlas model," Post-Print hal-00921151, HAL.
    4. Alexander Vervuurt, 2015. "Topics in Stochastic Portfolio Theory," Papers 1504.02988, arXiv.org.
    5. Praveen Kolli & Mykhaylo Shkolnikov, 2016. "SPDE limit of the global fluctuations in rank-based models," Papers 1608.00814, arXiv.org.

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