Incomplete financial markets and jumps in asset prices
Crès, Hervé, Markeprand, Tobias and Tvede, Mich (2016) Incomplete financial markets and jumps in asset prices. Economic Theory, 62 (1). pp. 201-219. ISSN 1432-0479
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Abstract
For incomplete financial markets, jumps in both prices and consumption can be unavoidable. We consider pure-exchange economies with infinite horizon, discrete time, uncertainty with a continuum of possible shocks at every date. The evolution of shocks follows a Markov process, and fundamentals depend continuously on shocks. It is shown that: (1) equilibria exist; (2) for effectively complete financial markets, asset prices depend continuously on shocks; and (3) for incomplete financial markets, there is an open set of economies U such that for every equilibrium of every economy in U, asset prices at every date depend discontinuously on the shock at that date.
Item Type: | Article |
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Uncontrolled Keywords: | financial markets, general equilibrium, jumps in asset prices |
Faculty \ School: | Faculty of Social Sciences > School of Economics |
Related URLs: | |
Depositing User: | Pure Connector |
Date Deposited: | 04 May 2017 06:10 |
Last Modified: | 06 Nov 2018 15:45 |
URI: | https://ueaeprints.uea.ac.uk/id/eprint/63377 |
DOI: | 10.1007/s00199-015-0884-9 |
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