Von Neumann-Gale Dynamical Systems with Applications in Finance

Join key speaker Dr Esmaeil Babaei (University of Leeds)

This talk provides a study on the theory of stochastic von Neumann-Gale dynamical systems and their applications in Finance. This is a class of multivalued dynamical systems possessing certain properties of convexity and homogeneity. Dynamic models of this kind were originally studied by von Neumann (1937) in his pioneering work on economic growth. Recently it has been discovered that such dynamical systems provide a convenient and natural framework for the modelling of financial markets with "frictions" (transaction costs and trading constraints).

In this work, we develop this idea and aim, in particular, at building capital growth theory for financial markets with frictions based on a certain class of von Neumann-Gale systems. A characteristic feature of this class is that it deals with state spaces represented by general cones of random vectors, not necessarily coinciding with the standard non-negative cones (as is the case in the economic, rather than financial, applications). In financial terms, this means that models at hand describe financial markets where short selling is allowed.

This seminar will take place on campus. Please contact Konstantinos Dareiotis (k.dareiotis@leeds.ac.uk) for the room information.