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Dynamics of Large Rank-Based Systems of Interacting Diffusions

Bruggeman, Cameron

We study systems of n dimensional diffusions whose drift and dispersion coefficients depend only on the relative ranking of the processes. We consider the question of how long it takes for a particle to go from one rank to another. It is argued that as n gets large, the distribution of particles satisfies a Porous Medium Equation. Using this, we derive a deterministic limit for the system of particles. This limit allows for direct calculation of the properties of the rank traversal time. The results are extended to the case of asymmetrically colliding particles.
These models are of interest in the study of financial markets and economic inequality. In particular, we derive limits for the performance of some Functionally Generated Portfolios originating from Stochastic Portfolio Theory.

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More About This Work

Academic Units
Mathematics
Thesis Advisors
Karatzas, Ioannis
Degree
Ph.D., Columbia University
Published Here
March 10, 2016
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