CARESS Working Paper #95-01 Financial Innovation and Expectations¤: Endogenous Incompleteness and Real Indeterminacy
نویسندگان
چکیده
This paper analyzes an incomplete ...nancial markets model with pricetaking utility-maximizing ...nancial innovators and no-short sales restrictions. It is shown that, given the indeterminacy of the no arbitrage price conjecture of innovators, ...nancial markets can remain incomplete in equilibrium. As a consequence, real indeterminacy of degree at least equal to int (S/2)(S(S/2)) results, where S is the number of spots in the future. The dimension of innovators’ beliefs giving rise to I newly introduced ...nancial assets is I(S-I), with an equal degree of real indeterminacy.
منابع مشابه
Pooling and endogenous market incompleteness
We study a financial market economy with a continuum of borrowers and pooling of borrowers’ promises. Under these conditions and in the absence of designing costs, utility-maximizing decisions of price-taking borrowersmay lead to financial market incompleteness. Parametrizing equilibria through the borrowers’ no-arbitrage beliefs, we link expectations to the financial market structure. Markets ...
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