A Sequence of Pareto-improving Financial Innovations
نویسندگان
چکیده
We consider a simple model of a pure exchange economy under uncertainty with two periods, one physical good, and nitely many states of the world. Denoting the number of the states by S, we prove that there exists a sequence of S securities, all in zero net supply, such that if they are introduced into markets one by one in the order of the sequence, then the security markets eventually become complete while the prices of any security is not a¤ected by subsequent introduction of newer securities. Since there is no pecuniary externality along such a sequence, the sequence is Pareto improving. JEL Classi cation Code: D51, D52, D61, G11 Keywords: Security markets, general equilibrium theory, incomplete markets, nancial innovation, Pareto improvement.
منابع مشابه
Pareto Improvement and Agenda Control of Sequential Financial Innovations
In an exchange economy under uncertainty with two periods, one physical good, and finitely many states of the world, we show that for every (complete or incomplete) market span there exists a sequence of securities such that if they are introduced into markets one by one, the prices of any security is not affected by the subsequent introduction of newer securities and they together generate the...
متن کاملPrediction of Financial Downside-Risk with Heavy-Tailed Conditional Distributions
The use of GARCH models with stable Paretian innovations in financial modeling has been recently suggested in the literature. This class of processes is attractive because it allows for conditional skewness and leptokurtosis of financial returns without ruling out normality. This contribution illustrates their usefulness in predicting the downside risk of financial assets in the context of mode...
متن کاملPareto-based Multi-criteria Evolutionary Algorithm for Parallel Machines Scheduling Problem with Sequence-dependent Setup Times
This paper addresses an unrelated multi-machine scheduling problem with sequence-dependent setup time, release date and processing set restriction to minimize the sum of weighted earliness/tardiness penalties and the sum of completion times, which is known to be NP-hard. A Mixed Integer Programming (MIP) model is proposed to formulate the considered multi-criteria problem. Also, to solve the mo...
متن کاملPareto Improving Social Security Reform when Financial Markets are Incomplete!?¤
This paper studies an overlapping generations model with stochastic production and incomplete markets to assess whether the introduction of an unfunded social security system leads to a Pareto improvement. When returns to capital and wages are imperfectly correlated a system that endows retired households with claims to labor income enhances the sharing of aggregate risk between generations. Ou...
متن کاملLet’s Take it to the Clouds: The Potential of Educational Innovations, Including Blended Learning, for Capacity Building in Developing Countries
In modern decentralised health systems, district and local managers are increasingly responsible for financing, managing, and delivering healthcare. However, their lack of adequate skills and competencies are a critical barrier to improved performance of health systems. Given the financial and human resource, constraints of relying on traditional face-to-face training to upskill a large and dis...
متن کامل