Equilibrium term structure relations of risky assets in incomplete markets

Equilibrium on International Assets and Goods Markets

Most of the international asset pricing models are developed in the second situation where purchasing power parity (PPP) is not respected.Investors of different countries do not agree on expected security returns. However, in this case, an equilibrium on the international assets market may exist but not on the international goods market. Our purpose in this paper is to give conditions under whi...

General Equilibrium with Endogenously Incomplete Financial Markets

The present paper studies a class of general equilibrium economies with imperfectly competitive financial intermediaries and price-taking consumers. Intermediaries optimally choose the securities they issue and the bid-ask spread they charge. Financial intermediation is costly, and hence markets are endogenously incomplete. An appropriate equilibrium concept is developed, and existence is prove...

Hedging of Options in Jump-Diffusion Markets with Correlated Assets

We consider the hedging problem in a jump-diffusion market with correlated assets. For this purpose, we employ the locally risk-minimizing approach and obtain the hedging portfolio as a solution of a multidimensional system of linear equations. ‎This system shows that in a continuous market, independence and correlation assumptions of assets lead to the same locally risk-minimizing portfolio. ‎...

Static Equilibrium under Uncertainty and Incomplete Markets

1.1. The first model of general economic equilibrium was presented by Walras [15] more than hundred years ago. As the model became generally known, it must have been clçar that it was desirable to generalize it, and take uncertainty into account. The most visible markets at the end of the last century were probably the stock exchanges, where uncertainty obviously played an important part. Insur...

General Equilibrium, Incomplete Markets and Macroeconomics