Equilibrium Theory of Financial Markets: Recent Developments

127 Pages Posted: 25 Nov 2020

See all articles by Marzena J. Rostek

Marzena J. Rostek

University of Wisconsin - Madison

Ji Hee Yoon

University College London - Department of Economics

Date Written: October 12, 2020

Abstract

This article reviews the theory of imperfectly competitive financial markets with special attention to recent contributions and rapidly growing new areas of research. We survey the literature on advances that have led to a common analytic framework for static, dynamic, centralized, and decentralized markets. This allows us to highlight the results that arise when traders have price impact (but not in competitive markets) and, separately, those that arise with market fragmentation.

Keywords: Imperfect competition, Price impact, Decentralized trading, Efficiency, Financial innovation, Market design

JEL Classification: D47, D53, G11, G12

Suggested Citation

Rostek, Marzena J. and Yoon, Ji Hee, Equilibrium Theory of Financial Markets: Recent Developments (October 12, 2020). Available at SSRN: https://ssrn.com/abstract=3710206 or http://dx.doi.org/10.2139/ssrn.3710206

Marzena J. Rostek (Contact Author)

University of Wisconsin - Madison ( email )

1180 Observatory Drive
Madison, WI 53703
United States
(608) 262-6723 (Phone)
(608) 262-2033 (Fax)

HOME PAGE: http://www.ssc.wisc.edu/~mrostek

Ji Hee Yoon

University College London - Department of Economics ( email )

Drayton House, 30 Gordon Street
30 Gordon Street
London, WC1H 0AX
United Kingdom

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