Endogenous Leverage and Asset Pricing in Double Auctions

Arbeitspapier

We study the trading of real assets financed by collateralized loans in an agent based model of a continuous double auction. This approach provides a complementary perspective on recent advances in the general equilibrium theory of endogenous leverage by studying a model that simultaneously describes dynamic and equilibrium properties of the market. Rather than taking prices as parametric there is an explicit price formation process which can be simulated or studied empirically. This is important because the economics of leverage is key to the understanding of financial crisis. We find that simulated double auctions converge to stable final states close to the theoretical equilibrium state. Consistent with equilibrium theory, real assets are traded at a price above fundamental value in the double auction. The equilibrium level of leverage also emerges in the simulations of the double auction.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 184

Classification and Topics

• Classification: Wirtschaft ; General Equilibrium and Disequilibrium: Financial Markets ; Asset Pricing; Trading Volume; Bond Interest Rates ; Information and Market Efficiency; Event Studies; Insider Trading ; Computational Techniques; Simulation Modeling
• Subject: Leverage ; Asset Pricing ; Double Auction ; Agent Based Modeling ; Kreditderivat ; Allgemeines Gleichgewicht ; Agentenbasierte Modellierung ; Kapitalmarkttheorie ; Auktionstheorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Breuer, Thomas ; Summer, Martin ; Vollbrecht, Hans-Joachim
• Event: Veröffentlichung
• (who): Oesterreichische Nationalbank (OeNB)
• (where): Vienna
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/264776
• Last update: 10.03.2025, 11:44 AM CET