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2011-11-16Buch DOI: 10.18452/4371
Equilibrium Pricing in Incomplete Markets under Translation Invariant Preferences
dc.contributor.authorCheridito, Patrick
dc.contributor.authorHorst, Ulrich
dc.contributor.authorKupper, Michael
dc.contributor.authorPirvu, Traian A.
dc.date.accessioned2017-06-16T00:32:38Z
dc.date.available2017-06-16T00:32:38Z
dc.date.created2011-12-08
dc.date.issued2011-11-16
dc.date.submitted2011-11-16
dc.identifier.issn1860-5664
dc.identifier.urihttp://edoc.hu-berlin.de/18452/5023
dc.description.abstractWe provide results on the existence and uniqueness of equilibrium in dynamically incomplete financial markets in discrete time. Our framework allows for heterogeneous agents, unspanned random endowments and convex trading constraints. In the special case where all agents have preferences of the same type and all random endowments are replicable by trading in the financial market we show that a one-fund theorem holds and give an explicit expression for the equilibrium pricing kernel. If the underlying noise is generated by finitely many Bernoulli random walks, the equilibrium dynamics can be described by a system of coupled backward stochastic difference equations, which in the continuous-time limit becomes a multi-dimensional backward stochastic differential equation. If the market is complete in equilibrium, the system of equations decouples, but if not, one needs to keep track of the prices and continuation values of all agents to solve it. As an example we simulate option prices in the presence of stochastic volatility, demand pressure and short-selling constraints.eng
dc.language.isoeng
dc.publisherHumboldt-Universität zu Berlin, Wirtschaftswissenschaftliche Fakultät
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/
dc.subjectincomplete marketseng
dc.subjectcompetitive equilibriumeng
dc.subjectheterogenous agentseng
dc.subjecttrading constraintseng
dc.subjectbackward stochastic difference equationseng
dc.subject.ddc330 Wirtschaft
dc.titleEquilibrium Pricing in Incomplete Markets under Translation Invariant Preferences
dc.typebook
dc.identifier.urnurn:nbn:de:kobv:11-100197056
dc.identifier.doihttp://dx.doi.org/10.18452/4371
local.edoc.container-titleSonderforschungsbereich 649: Ökonomisches Risiko
local.edoc.pages48
local.edoc.type-nameBuch
local.edoc.container-typeseries
local.edoc.container-type-nameSchriftenreihe
local.edoc.container-volume2011
local.edoc.container-issue83
local.edoc.container-year2011
local.edoc.container-erstkatid2195055-6

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