The 32th Frontier Forum for Digital Technology and Finance

Abstract：

This paper investigates the impacts of probabilistic attitude on the trading behavior and market microstructure. Instead of emphasizing the probability overweight, we focus on the probabilistic optimistic-pessimistic attitude, which induces self-confidence in trading capability for optimistic traders, and leads to limited participation for pessimistic traders. We derive a probabilistic neutral equilibrium as a benchmark case, where most market qualities are proved state-independent. The optimistic market and pessimistic market generate opposite features in price premium and price impact function. We demonstrate the two markets exhibit reversed state-dependent characteristics in price skewness, market volatility, market liquidity, and price efficiency. These patterns hold in discussing the information cost and trading cost. Our results indicate a decisive role of probabilistic optimistic-pessimistic attitude in deciding the asset price and market quality.

Speaker Introduction:

Shunming Zhang is a professor (Wu Yuzhang Scholar Lecture Professor) at the School of Finance, Renmin University of China, a doctoral supervisor, and the director of the Institute of Financial Engineering at Renmin University of China. He holds a Bachelor's degree in Mathematics from the Department of Mathematics, Central China Normal University, and a Master's and Ph.D. in Mathematical Economics from the Institute of Systems Science, Chinese Academy of Sciences. He has served as a lecturer and associate professor at the School of Economics and Management, Tsinghua University, a visiting professor and postdoctoral researcher in the Department of Economics, University of Western Ontario (Canada), a researcher in the School of Economics and Finance, Victoria University of Wellington (New Zealand), and a specially appointed professor (doctoral supervisor) of Wang Yanan Institute for Studies in Economics, Xiamen University. He was awarded the National Science Fund for Distinguished Young Scholars in 2008, selected as a national candidate for the "New Century National Hundred, Thousand, and Ten Thousand Talent Project" in 2009, granted the Special Government Allowance from the State Council in 2013, and appointed as a specially-appointed professor under the "Chang Jiang Scholars Program" by the Ministry of Education in 2015.

Currently, he serves as an editorial board member of "Systems Engineering - Theory & Practice," "Economic Mathematics," and Journal of Systems Science and Information, among others. He has presided over the National Natural Science Foundation of China's Youth Program, the National Social Science Fund's Key Project, the National Science Fund for Distinguished Young Scholars, four National Natural Science Foundation of China's General Programs, and the National Natural Science Foundation of China's Key Project (Theoretical Research on Financial Risk Management under the Transformation of Digital Economy, 2023-2027). He is currently involved in the Key Research and Development Program of the Ministry of Science and Technology, "Key Technologies and Applications of Financial Data Synthesis and Intelligent Model Risk Monitoring" (Special Project: Science and Technology Support for Social Governance and Smart Society), and serves as the sub-project leader for Sub-project 1, "Research on Financial Data Synthesis and Data Risk Assessment Technology." In recent years, he has been focusing on the latest developments in uncertainty, studying ambiguity and asset pricing, and has published over one hundred papers in domestic and international mainstream economics and finance journals.