Graduate Students
 Faculty in  Mathematical  Finance            
Math Finance Home Conferences Seminars People Open Positions Contact

Probability and Computational Finance Seminar
Umut Cetin
Title: Linear Inverse Problems and Market Microstructure

Abstract: In the setting of Kyle's model we discuss the connection between the existence of an equilibrium in a financial market with asymmetrically informed agents and the solutions to a class of linear inverse problems with kernels given by the transition functions of a Markov process. In particular we will observe that when the informed trader receives a continuous signal changing over time and the market makers are risk averse, existence of an equilibrium becomes related to an ill-posed inverse problem for a backward parabolic equation with a given initial condition. A necessary and sufficient condition will be given in order for the inverse problem to have a solution in some L^2 -space. For a transient diffusion this condition can be interpreted in terms of its last passage times.

Date: Monday, March 30, 2015
Time: 4:30 pm
Location: Wean Hall 6423
Submitted by:  Kasper Larsen