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Incomplete Financial Markets and Jumps in Asset Prices
Cres, Hervé - 2009
A dynamic pure-exchange general equilibrium model with uncertainty is studied. Fundamentals are supposed to depend continuously on states of nature. It is shown that: 1. if financial markets are complete, then asset prices vary continuously with states of nature, and; 2. if financial markets are...
Persistent link: https://www.econbiz.de/10013157819
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Radner equilibria under ambiguous volatility
Beißner, Patrick - 2013
The present paper considers a class of general equilibrium economics when the primitive uncertainty model features uncertainty about continuous-time volatility. This requires a set of mutually singular priors, which do not share the same null sets. For this setting we introduce an appropriate...
Persistent link: https://www.econbiz.de/10010212527
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Coherent price systems and uncertainty-neutral valuation
Beißner, Patrick - 2012
We consider fundamental questions of arbitrage pricing arising when the uncertainty model is given by a set of possible … mutually singular probability measures. With a single probability model, essential equivalence between the absence of arbitrage … equivalent symmetric martingale measure sets, in a dynamic trading framework under absence of prior depending arbitrage. We prove …
Persistent link: https://www.econbiz.de/10009512789
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Coherent price systems and uncertainty-neutral valuation
Beißner, Patrick - 2012
We consider fundamental questions of arbitrage pricing arising when the uncertainty model is given by a set of possible … mutually singular probability measures. With a single probability model, essential equivalence between the absence of arbitrage … equivalent symmetric martingale measure sets, in a dynamic trading framework under absence of prior depending arbitrage. We prove …
Persistent link: https://www.econbiz.de/10010320000
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Coherent price systems and uncertainty-neutral valuation : conference paper
Beißner, Patrick - 2013 - This version: 28 February, 2013
We consider fundamental questions of arbitrage pricing arising when the uncertainty model incorporates volatility … uncertainty. With a standard probabilistic model, essential equivalence between the absence of arbitrage and the existence of an … martingale measure sets, in a dynamic trading framework under absence of prior depending arbitrage. We prove the existence of …
Persistent link: https://www.econbiz.de/10010338399
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The financial origins of non-fundamental risk
Acharya, Sushant; Dogra, Keshav; Singh, Sanjay R. - 2022 - Last updated: January 14, 2022
We formalize the idea that the financial sector can be a source of non-fundamental risk. Households' desire to hedge against price volatility can generate price volatility in equilibrium, even absent fundamental risk. Fearing that asset prices may fall, risk-averse households demand safe assets...
Persistent link: https://www.econbiz.de/10012798791
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Pricing and hedging derivative securities in incomplete markets : an [epsilon]-arbitrage approach
Bertsimas, Dimitris; Kogan, Leonid; Lo, Andrew W. - 1997
Persistent link: https://www.econbiz.de/10000646551
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Endogenous completeness of diffusion driven equilibrium markets
Hugonnier, Julien; Malamud, Semyon; Trubowitz, Eugene - 2009
We study the existence of equilibria with endogenously complete markets in a continuous-time, heterogenous agents economy driven by a multidimensional diffusion process. Our main results show that if prices are real analytic as functions of time and the state variables of the model then a...
Persistent link: https://www.econbiz.de/10003971255
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Volatility Uncertainty, Time Decay, and Option Bid-Ask Spreads in an Incomplete Market
Hsieh, PeiLin Billy - 2017
This paper documents the fact that in options markets, the (percentage) implied volatility bid-ask spread increases at an increasing rate as the option's maturity date approaches. To explain this stylized fact, this paper provides a market microstructure model for the bid-ask spread in options...
Persistent link: https://www.econbiz.de/10012974407
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Continuous equilibrium under base preferences and attainable initial endowments
Horst, Ulrich; Kupper, Michael; Macrina, Andrea; … - 2011
equilibrium exists and the agents' optimal trading strategies are constant. Affine processes, and the theory of information …
Persistent link: https://www.econbiz.de/10009379446