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Arbitrage Opportunity, Impossible Frontier, and Logical Circularity in CAPM Equilibrium

Abad, Pharos - 2020

Persistent link: https://www.econbiz.de/10012841039

Market Selection and the Absence of Arbitrage

Elmiger, Sabine - 2021

A central conjecture of behavioural finance is that arbitrage opportunities appear as a result of systematic irrational … investment behaviour and persist since real-world arbitrage trades actually involve costs and risks due to market frictions and … non-fundamental risk. This paper shows that the no-arbitrage condition can emerge from the market selection process even …

Persistent link: https://www.econbiz.de/10013242357

Survival, Arbitrage, and Equilibrium with Financial Derivatives in Constrained Asset Markets

Hahn, Guangsug - 2012

Survival conditions ensure the presence of consumptions that cost less than the total contingent income of agents in general equilibrium models. These conditions are generally fulfilled in competitive equilibrium. This paper shows the existence of equilibrium for incomplete-market economies...

Persistent link: https://www.econbiz.de/10013097342

On securitization, market completion and equilibrium risk transfer

Horst, Ulrich; Pirvu, Traian A.; Reis, Gonçalo Dos - 2010

We propose an equilibrium framework within which to price financial securities written on non- tradable underlyings such as temperature indices. We analyze a financial market with a finite set of agents whose preferences are described by a convex dynamic risk measure generated by the solution of...

Persistent link: https://www.econbiz.de/10003952854

Rational asset pricing bubbles and portfolio constraints

Hugonnier, Julien - 2010

equilibrium even if there are unconstrained agents in the economy who can bene t from the corresponding limited arbitrage …

Persistent link: https://www.econbiz.de/10003966068

Asset pricing and consumption-portfolio choice with recursive utility and unspanned risk

Kraft, Holger; Seiferling, Thomas; Seifried, Frank Thomas - 2014 - First version: March 6, 2014; this version: June 1, 2014

We study consumption-portfolio and asset pricing frameworks with recursive preferences and unspanned risk. We show that in both cases, portfolio choice and asset pricing, the value function of the investor/representative agent can be characterized by a specific semilinear partial differential...

Persistent link: https://www.econbiz.de/10010359861

Long-run heterogeneity in an exchange economy with fixed-mix traders

Bottazzi, Giulio; Dindo, Pietro; Giachini, Daniele - 2015

We consider an exchange economy with heterogeneous agents and multiple assets and investigate the coupled dynamics of assets' prices and agents' wealth. We assume that agents have heterogeneous beliefs and invest on each asset a fraction of wealth proportional to its expected dividends. Our main...

Persistent link: https://www.econbiz.de/10011386757

Undiversifiable Returns in a CAPM Economy

Braila, Peghe - 2011

The effects of endogenous undiversifiable investment and market structure changes on security pricing are analyzed within the GEI-CAPM (General Equilibrium with Incomplete Markets Capital Asset Pricing Model). Both the mutual fund and security market line theorems are extended conditional to a...

Persistent link: https://www.econbiz.de/10013128151

Dynamic Equilibrium with Heterogeneous Agents and Risk Constraints

Prieto, Rodolfo - 2011

We examine the impact of risk-based portfolio constraints on asset prices in an exchange economy. Constrained agents scale down their portfolio and behave locally like power utility investors with risk aversion that depends on current market conditions. The imposition of constraints dampens...

Persistent link: https://www.econbiz.de/10013132941

Equilibrium Theory with Link Portfolios

Won, Dong Chul - 2012

Portfolio constraints often prevent financial derivatives from being synthetically created by primitive assets and thus, open a way for the 'redundant' assets to participate in expanding risk-sharing opportunities. They bring about peculiar portfolios, called 'link portfolios,' at an aggregate...

Persistent link: https://www.econbiz.de/10013101179

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