KAUST DepartmentComputer, Electrical and Mathematical Sciences and Engineering (CEMSE) Division
Applied Mathematics and Computational Science Program
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AbstractIn this paper, we present a Boltzmann-type price formation model, which is motivated by a parabolic free boundary model for the evolution of price presented by Lasry and Lions in 2007. We discuss the mathematical analysis of the Boltzmann-type model and show that its solutions converge to solutions of the model by Lasry and Lions as the transaction rate tends to infinity. Furthermore, we analyse the behaviour of the initial layer on the fast time scale and illustrate the price dynamics with various numerical experiments. © 2013 The Author(s) Published by the Royal Society. All rights reserved.
SponsorsL.C. was partially supported by a grant from the DMS division of the NSF. P. A. M. expresses his gratitude to the Humboldt Foundation for awarding the Humboldt ResearchAward to him, which allowed him to spend time with Martin Burger's research group in Munster, where this research was initiated. P. A. M. also acknowledges support from the Paris Foundation of Mathematics. M. T. W. acknowledges support from the Austrian Science Foundation FWF via the Hertha-Firnberg project no. T456-N23. We thank Bertram During (University of Sussex) for the useful hints to literature.
PublisherThe Royal Society