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The behavioral implications of the bilateral gamma process

The behavioral implications of the bilateral gamma process
The behavioral implications of the bilateral gamma process

Bilateral gamma process is widely used in risk management and asset pricing. However the behavioral implications of this process remain unknown. This paper investigates this problem for the first time within the framework of Tauchen and Pitts (1983). With the assumption that there are two types of traders in the market, the optimistic and the pessimistic, we find the bilateral gamma process can be derived from Walrasian equilibrium. This finding establishes the microstructure foundations for the bilateral gamma process.

Asset price, Bilateral gamma process, Microstructure, Walrasian equilibrium
0378-4371
259-264
Xie, Haibin
4fb02e05-14da-4857-884c-9f39c70ef272
Wang, Shouyang
d6c832ff-464d-4d42-9ea0-a2f001091e55
Lu, Zudi
4aa7d988-ac2b-4150-a586-ca92b8adda95
Xie, Haibin
4fb02e05-14da-4857-884c-9f39c70ef272
Wang, Shouyang
d6c832ff-464d-4d42-9ea0-a2f001091e55
Lu, Zudi
4aa7d988-ac2b-4150-a586-ca92b8adda95

Xie, Haibin, Wang, Shouyang and Lu, Zudi (2018) The behavioral implications of the bilateral gamma process. Physica A: Statistical Mechanics and its Applications, 259-264. (doi:10.1016/j.physa.2018.02.121).

Record type: Article

Abstract

Bilateral gamma process is widely used in risk management and asset pricing. However the behavioral implications of this process remain unknown. This paper investigates this problem for the first time within the framework of Tauchen and Pitts (1983). With the assumption that there are two types of traders in the market, the optimistic and the pessimistic, we find the bilateral gamma process can be derived from Walrasian equilibrium. This finding establishes the microstructure foundations for the bilateral gamma process.

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S0378437118302267 - Accepted Manuscript
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More information

Accepted/In Press date: 18 February 2018
e-pub ahead of print date: 21 February 2018
Keywords: Asset price, Bilateral gamma process, Microstructure, Walrasian equilibrium

Identifiers

Local EPrints ID: 418549
URI: http://eprints.soton.ac.uk/id/eprint/418549
DOI: doi:10.1016/j.physa.2018.02.121
ISSN: 0378-4371
PURE UUID: 7aecd1eb-1d3b-4a52-b156-d72cf756d7a0
ORCID for Zudi Lu: ORCID iD orcid.org/0000-0003-0893-832X

Catalogue record

Date deposited: 12 Mar 2018 17:30
Last modified: 18 Mar 2024 05:16

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Contributors

Author: Haibin Xie
Author: Shouyang Wang
Author: Zudi Lu ORCID iD

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