| Abstract: |
| In this work, we investigate price formation models under the influence of common noise, where agents continuously trade a commodity in a stochastic environment. The model incorporates stochastic supply dynamics and agent preferences, aiming to determine a market-clearing price that balances supply and demand. By employing a variational formulation, we derive a system of stochastic partial differential equations (SPDEs) that govern the price evolution, agent behavior, and asset distribution. We highlight key results, including the decoupling of variance dynamics in the quadratic case and the implications for market equilibrium. |
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