Liquidity Illusion

“Liquidity Illusion is a significant contribution to the mathematical theory of asset valuation. Asaf brings together mean-field game theory, stochastic control, and general equilibrium analysis in a framework that is both mathematically rigorous and applicable to the practice of institutional investment. The identification of the McKean–Vlasov externality in private capital markets—and its correction through a uniquely derived Pigouvian instrument—is genuinely novel. This book could reshape how the profession thinks about illiquidity risk.” - Robert J. Elliott, Emeritus RBC Financial Group Professor of Finance, University of Calgary

Liquidity Illusion: The General Equilibrium Theory of Private Capital Valuation addresses an open question: how to value private-market assets when the liquidity premium is stochastic, shaped by collective investor behaviour, and productive of externalities in secondary markets.

The starting point is DCF. Endorsed by the International Private Equity and Venture Capital Valuation guidelines and embedded in regulation from Solvency II to AIFMD, DCF is structurally unsuited to private assets — not through parameter misuse, but because it holds the liquidity premium fixed where private-market liquidity is stochastic and governed by McKean–Vlasov mean-field interactions. This book replaces it with a rigorous, empirically calibrated framework. GELAV generalises DCF, yielding five results with direct implications for investment and regulation.

The book serves two audiences. Section One (Chapters 1–9) is for practitioners—investment officers, fund managers, regulators, and sophisticated LPs wanting to understand and improve current valuation practices. No advanced math is needed. Section Two (Chapters 10–20) is for researchers—PhD students, academics, and quants seeking full math derivations.

Features

• The first continuous-time general-equilibrium model of private-capital valuation
• Five new theorems with calibrated numerical content
• Two-part structure that serves practitioners and researchers
• Direct connection to live regulation
• Reproducible computational platform