We build a new asset pricing framework to study the effects of aggregate illiquidity on asset prices, volatilities and correlations. In our framework the Black-Scholes economy is obtained as the limiting case of perfectly liquid markets. The model is consistent with empirical studies on the...

This paper presents a possible explanation for some of the empirical properties of asset returns within a heterogeneous-agents framework. The model turns out, even if we assume the input fundamental value follows a simple Gaussian distribution lacking both fat tails and volatility dependence,...

A mutual insurance firm is a firm whose stockholders are the bearers of the insurance contracts. Insurance is then viewed as a collective (pooled) process of persons paying a fixed (or variable, contingent) amount monthly (the premium) and seeking protection against claims that may occur to any...

Price forecasting and trading strategies modelling are examined with major international stock indexes under different time horizons. Results demonstrate that an accurate prediction is equally important as a stable saving rate for long-term survivability. The best economic performances are...

In the past decades, the amount of worldwide security transactions that was processed by electronic trading platforms increased significantly. In this paper we develop a theoretical framework for the pricing of limit orders of the Electronic Security Trading System Xetra operated by the German...

We extend a standard monetary quantitative model to provide a richer role for financial intermediaries and to generate greater persistence in the effects of monetary policy shocks. We first assume that existing clients of banks operate a diminishing returns to scale technology. Second, we assume...

We adapt the continuous time random walk (CTRW) formalism to describe the asset price evolution. We show some of the problems that can be treated using this approach. We basically focus on two aspects: (i) the derivation of the price distribution from high-frequency data; and (ii) the inverse...