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From Discrete to Continuous Time Evolutionary Finance Models

Author

Listed:
  • Jan PALCZEWSKI

    (University of Leeds and University of Warsaw)

  • Klaus Reiner SCHENK-HOPPE

    (University of Leeds)

Abstract

This paper aims to open a new avenue for research in continuoustime financial market models with endogenous prices and heterogenous investors. The main result is the derivation of the limit of a discretetime evolutionary stock market model as the length of the time period tends to zero. The resulting explicit model in continuous time generalizes the workhorse model of mathematical finance by introducing asset prices that are driven by the market interaction of investors following self-financing trading strategies. Our approach also offers a numerical scheme for the simulation of the continuous-time model.

Suggested Citation

  • Jan PALCZEWSKI & Klaus Reiner SCHENK-HOPPE, 2008. "From Discrete to Continuous Time Evolutionary Finance Models," Swiss Finance Institute Research Paper Series 08-30, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp0830
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    File URL: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1288564
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    Cited by:

    1. is not listed on IDEAS
    2. Mikhail Zhitlukhin, 2018. "Survival investment strategies in a continuous-time market model with competition," Papers 1811.12491, arXiv.org, revised Sep 2019.
    3. Mikhail Zhitlukhin, 2020. "A continuous-time asset market game with short-lived assets," Papers 2008.13230, arXiv.org.

    More about this item

    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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