We solve in closed-form a Nash equilibrium model in which a finite number of exponential investors trade continuously with price-impact over a finite time horizon . By comparing our continuous-time Nash equilibrium model to the otherwise identical competitive Radner equilibrium model, we show that our Nash equilibrium model with price-impact can simultaneously help resolve the interest rate puzzle, the equity premium puzzle, and the stock volatility puzzle.
We solve in closed-form an equilibrium model in which a finite number of exponential investors continuously consume and trade with price-impact . By comparing our continuous-time price-impact equilibrium model to the analogous Pareto efficient equilibrium model, we show that our model can simultaneously help resolve the interest rate puzzle, the equity premium puzzle, and the stock-price volatility puzzle.
R
a Nash
an
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trade continuously
continuously consume and trade
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over a finite time horizon
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Nash
price-impact
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otherwise identical competitive Radner
analogous Pareto efficient
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Nash equilibrium model with price-impact
model
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stock
stock-price