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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26843
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| Title: | Continuous time equilibrium pricing of nonredundant assets |
| Authors: | Jouini, Elyes
Napp, Clotilde |
| Keywords: | equilibrium
optimality
incomplete markets
nonredundant assets
derivatives pricing |
| Issue Date: | 2-Feb-1999 |
| Series/Report no.: | FIN-99-008 |
| Abstract: | The problem of fair pricing of contingent claims is well understood in
the context of an arbitrage free, complete financial market, with
perfect information. But in the more realistic context of an incomplete
market or with imperfect information, the arbitrage approach does not
enable us to obtain a unique fair price for all contingent claims but
only a fair pricing interval, which is known to be too large to be of
great interest. We present here a new approach by exploiting partial
conditions issued from equilibrium analysis. The explicit use of market
clearing conditions enables us to obtain a unique preference-free
admissible price. On a practical point of view, this enables us to give
a unique fair price to any contingent claim. Moreover, on a theoretical
point of view, this unique price appears to be only dependent on the
real economy, as opposed to the financial one. |
| URI: | http://hdl.handle.net/2451/26843 |
| Appears in Collections: | Finance Working Papers
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