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. © 2018 Elsevier B.V.
| Original language | English |
|---|---|
| Pages (from-to) | 259-264 |
| Journal | Physica A: Statistical Mechanics and its Applications |
| Volume | 500 |
| DOIs | |
| Publication status | Published - 15 Jun 2018 |
| Externally published | Yes |
Bibliographical note
Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].Research Keywords
- Asset price
- Bilateral gamma process
- Microstructure
- Walrasian equilibrium
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