Author: Wan-hsiang Pan
Publisher:
ISBN:
Category : Equilibrium (Economics)
Languages : en
Pages : 158

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Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 79

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Author: Tarun Sabarwal
Publisher:
ISBN:
Category :
Languages : en
Pages : 38

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Book Description
A new measure of constrained efficiency for application in economies with incomplete markets is presented. This measure -- termed Allais-Malinvaud efficiency -- can be viewed as adjusting for market incompleteness not fully captured in previous work. It is shown that equilibrium allocations in Radner-GEI economies are always Allais-Malinvaud efficient. In particular, a re-distribution of assets in equilibrium cannot induce a relative price change that leads to an Allais-Malinvaud improvement. Moreover, this result extends to Radner-GEI economies in which consumer liability is limited by bankruptcy.

Author: Alessandro Citanna
Publisher:
ISBN:
Category :
Languages : en
Pages : 44

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Author: Suleyman Basak
Publisher:
ISBN:
Category :
Languages : en
Pages :

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This paper explores the role of portfolio constraints in generating multiplicity of equilibrium. We present a simple financial market economy with two goods and two households, households who face constraints on their ability to take unbounded positions in risky stocks. Absent such constraints, equilibrium allocation is unique and is Pareto efficient. With one portfolio constraint in place, the efficient equilibrium is still possible; however, additional inefficient equilibria in which the constraint is binding may emerge. We show further that with portfolio constraints cum incomplete markets, there may be a continuum of equilibria; adding incomplete markets may lead to real indeterminacy.

Author: Rohit Rahi
Publisher:
ISBN:
Category :
Languages : en
Pages :

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This paper analyzes a simple parametric model of endogenously determined incomplete futures markets, focusing on their role in allocating risk and transmitting private information. It characterizes market structures that are constrained efficient in the sense that no other market structure, with the same number of assets, leads to a Pareto-dominating allocation in equilibrium. Necessary conditions for constrained efficiency are (a) hedging efficiency (the hedging quality of futures contracts cannot be improved for one agent without reducing it for another, and (b) informational efficiency (the informational content of futures prices cannot be increased for one agent without diminishing it for another). Explicit characterizations are obtained for these notions of efficiency. It is shown that, under certain conditions, the market structure determined by volume-maximizing futures is informationally efficient and, in the case of a single futures contract, hedging-efficient as well.

Author: Dirk Krueger
Publisher:
ISBN:
Category : Fiscal policy
Languages : en
Pages : 334

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Author: Thorsten Hens
Publisher: Springer Science & Business Media
ISBN: 1475753179
Category : Business & Economics
Languages : en
Pages : 313

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Book Description
The purpose of this book is to give a sound economic foundation of finance. Finance is a coherent branch of applied economics that is designed to understand financial markets in order to give advice for practical financial decisions. This book argues that for a sound economic foundation of finance the famous general equilibrium model which in its modern form emphasizes the incompleteness of financial markets is well suited. The aim of the book is to demonstrate that financial markets can be meaningfully embedded into a more general system of markets including, for example, commodity markets. The interaction of these markets can be described via the well known notion of a competitive equilibrium. We argue that for a sound foundation this competitive equilibrium should be unique. In a first step we demonstrate that this essential goal cannot of be achieved based only on the rationality principle, i. e. on the assumption utility maximization of some utility function subject to the budget constraint. In particular we show that this important lack of structure is disturbing as well for the case of mean-variance utility functions which are the basis of the Capital Asset Pricing Model, one of the cornerstones of finance. The final goal of our book is to give reasonable restrictions on the agents' utility functions which lead to a well determined financial markets model.

Author: Felix Kubler
Publisher:
ISBN:
Category : Competition
Languages : en
Pages : 50

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Author: Antonio Villanacci
Publisher: Springer Science & Business Media
ISBN: 9781402072017
Category : Business & Economics
Languages : en
Pages : 516

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Book Description
Local uniqueness and smooth dependence of the endogenous variables from the exogenous ones are studied using a version of a so-called parametric transversality theorem. In a standard general equilibrium model, all equilibria are efficient, but that is not the case if some imperfection, like incomplete markets, asymmetric information, strategic interaction, is added. Then, for almost all economies, equilibria are inefficient, and an outside institution can Pareto improve upon the market outcome. Those results are proved showing that a well-chosen system of equations has no solutions."