Abstract
In this paper, we propose a clearing model for prices in a financial market due to margin calls on short sold assets. In doing so, we construct an explicit formulation for the prices that would result immediately following asset purchases and a margin call. The key result of this work is the determination of a threshold short interest ratio which, if exceeded, results in the discontinuity of the clearing prices due to a feedback loop.
Original language | English |
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Pages (from-to) | SC113-SC122 |
Journal | SIAM Journal on Financial Mathematics |
Volume | 13 |
Issue number | 4 |
DOIs | |
State | Published - 2022 |
Keywords
- margin call
- market clearing
- short squeeze