Non-Implementability of Arrow-Debreu Equilibria by Continuous Trading Under Knightian Uncertainty

Under risk, Arrow-Debreu equilibria can be implemented as Radner equilibria by continuous trading of few long-lived securities. We show that this result generically fails if there is Knightian uncertainty in the volatility. Implementation is only possible if all discounted net trades of the equilibrium allocation are mean ambiguity-free.

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Year of publication:	2014-09
Authors:	Riedel, Frank ; Beissner, Patrick
Institutions:	Institut für Mathematische Wirtschaftsforschung, Universität Bielefeld
Subject:	Knightian Uncertainty \| Ambiguity \| General Equilibrium \| Asset Pricing \| Radner Equilibrium

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Extent:	application/pdf
Series:	Working Papers.
Type of publication:	Book / Working Paper
Notes:	Number 527 28 pages
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; G11 - Portfolio Choice
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010929861