Sequentially complete markets remain incomplete

The Unit Root Property when Markets Are Sequentially Incomplete∗

We consider pure exchange, one good OLG economies under stationary Markov uncertainty. It is known that when markets are sequentially complete, a stationary equilibrium at which the agents common matrix of intertemporal rates of substitution has a Perron root which is less than or equal to one is conditionally Pareto optimal (CPO). We assume that there exists a long-lived dividend paying asset ...

Complete and incomplete financial markets in multi-good economies

In several multi-good models in the literature we see in equilibrium that the span of the stocks drop relative to the span of the dividends, which is not a desirable feature. Therefore, in this paper, we investigate conditions for endogenous completeness and incompleteness in continuous-time financial markets driven by diffusion processes with multiple consumption goods and heterogeneous agents...

Hedging Strategies : Complete and Incomplete Systems of Markets

Complete and Incomplete Markets with Short-Sale Constraints

This paper argues that the introduction of a short-sale constraint in the ArrowRadner framework invalidates standard definitions of complete and incomplete markets. In this constrained set-up, two threshold values with familiar properties arise. The case of a zero short-sale bound set on some security fulfills the standard definition of “incomplete” financial markets. Beyond a particular level ...

Incomplete Markets

In reality, markets are incomplete, meaning that some payoffs cannot be replicated by trading in marketed securities. The classic no-arbitrage theory of valuation in a complete market, based on the unique price of a self-financing replicating portfolio, is not adequate for nonreplicable payoffs in incomplete markets. We focus on pricing over-the-counter derivative securities, surveying many pro...