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Tyler ABBOT, PhD Candidate of the Department, is finalist for the SIAM Conference Paper Prize


Tyler ABBOT, finalist for the SIAM Conference Paper Prize

Tyler ABBOT - a SciencesPo PhD student in Economics - was distinguished by the Society for Industrial and Applied Mathematics (SIAM), Financial Mathematics and Engineering for his paper: Heterogeneous Risk Preferences in Financial Markets (link to PDF)

We extend our warmest congratulations.

SIAM announced the winners at its annual Conference on Financial Mathematics & Engineering.

Currently, Tyler is writing a thesis on 'Heterogeneous Risk Preferences : theory and Empirics' under the supervision of Nicolas Coeurdacier, Associate Professor of Economics at Sciences Po.

ABSTRACT :

This paper builds a continuous time model of N heterogeneous agents, whose CRRA preferences di er in their level of risk aversion and considers the Mean Field Game (MFG) in the limit as N becomes large. The model represents a natural extension of other work on heterogeneous risk preferences (e.g. Cvitanic et al. (2011)) to a continuum of types. I add to the previous literature by characterizing the limit in N and by studying the short run dynamics of the distribution of asset holdings. I find that agents dynamically, self select into one of three groups depending on their preferences: leveraged investors, diversified investors, and saving divestors, driven by a wedge between the market price of risk and the risk free rate. The solution is characterized by dependence on individual holdings of the risky asset, which in the limit converge to a stochastic ow of measures. In this way, the mean field is not dependent on the state, but on the control, making the model unique in the literature on MFG and providing a convenient approach for simulation. I simulate by path monte-carlo both the nite types and continuous types economies and find that both models match qualitative features of real world financial markets. However, the continuous types economy is more robust to the definition of the support of the distribution of preferences and computationally less costly than the nite types economy.

More about Tyler ABBOT and his research