Faculty Digital Archive

Archive@NYU >
Stern School of Business >
Finance Working Papers >

Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/26843

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

Files in This Item:

File Description SizeFormat
wpa99008.pdf425.32 kBAdobe PDFView/Open

Items in Faculty Digital Archive are protected by copyright, with all rights reserved, unless otherwise indicated.

 

The contents of the FDA may be subject to copyright, be offered under a Creative Commons license, or be in the public domain.
Please check items for rights statements. For information about NYU’s copyright policy, see http://www.nyu.edu/footer/copyright-and-fair-use.html 
Valid XHTML 1.0 | CSS