Existence of an endogenously complete equilibrium driven by a diffusion (Q486924): Difference between revisions
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The author considers a general equilibrium model of financial markets in which the dividend of stocks and the agents' endowments are given by semimartingales defined by Itô processes. He considers the existence of a complete Radner equilibrium in the model -- i.e. the equilibrium given in terms of stock prices processes and consumption processes that satisfy market clearing conditions. The model in the equilibrium should be complete -- all stock prices should be defined by the unique martingale measure. The author considers the equivalence of such equilibrium with Arrow-Debreu equilibrium, without financial markets. The main result states that under some relatively mild assumptions the Radner equilibrium exists. In particular, in this approach, the driving processes of dividends can be time-inhomogeneous. The proof uses the equivalence of Arrow-Debreu equilibrium and Radner equilibrium. The proof of the existence of an Arrow-Debreu equilibrium depends on previous works [the author and \textit{S. Predoiu}, Stochastic Processes Appl. 124, No. 1, 81--100 (2014; Zbl 1301.60058); ``Existence and uniqueness of Arrow-Debreu equilibria with consumptions in \(\mathbf{L}^0_+\)'', Preprint, \url{arXiv:1304.3284}] and on the analytic properties of the agents' utility functions. | |||
Property / review text: The author considers a general equilibrium model of financial markets in which the dividend of stocks and the agents' endowments are given by semimartingales defined by Itô processes. He considers the existence of a complete Radner equilibrium in the model -- i.e. the equilibrium given in terms of stock prices processes and consumption processes that satisfy market clearing conditions. The model in the equilibrium should be complete -- all stock prices should be defined by the unique martingale measure. The author considers the equivalence of such equilibrium with Arrow-Debreu equilibrium, without financial markets. The main result states that under some relatively mild assumptions the Radner equilibrium exists. In particular, in this approach, the driving processes of dividends can be time-inhomogeneous. The proof uses the equivalence of Arrow-Debreu equilibrium and Radner equilibrium. The proof of the existence of an Arrow-Debreu equilibrium depends on previous works [the author and \textit{S. Predoiu}, Stochastic Processes Appl. 124, No. 1, 81--100 (2014; Zbl 1301.60058); ``Existence and uniqueness of Arrow-Debreu equilibria with consumptions in \(\mathbf{L}^0_+\)'', Preprint, \url{arXiv:1304.3284}] and on the analytic properties of the agents' utility functions. / rank | |||
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Property / reviewed by | |||
Property / reviewed by: Paweł Kliber / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 91B10 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 60H10 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 26E05 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 60G44 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 91B51 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 60J60 / rank | |||
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Property / zbMATH DE Number | |||
Property / zbMATH DE Number: 6387646 / rank | |||
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Property / zbMATH Keywords | |||
dynamic stochastic equilibrium | |||
Property / zbMATH Keywords: dynamic stochastic equilibrium / rank | |||
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Property / zbMATH Keywords | |||
Radner equilibrium | |||
Property / zbMATH Keywords: Radner equilibrium / rank | |||
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Property / zbMATH Keywords | |||
martingale representation | |||
Property / zbMATH Keywords: martingale representation / rank | |||
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Property / zbMATH Keywords | |||
non-stationary market models | |||
Property / zbMATH Keywords: non-stationary market models / rank | |||
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Property / zbMATH Keywords | |||
asset pricing | |||
Property / zbMATH Keywords: asset pricing / rank | |||
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Revision as of 20:45, 30 June 2023
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English | Existence of an endogenously complete equilibrium driven by a diffusion |
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Existence of an endogenously complete equilibrium driven by a diffusion (English)
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19 January 2015
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The author considers a general equilibrium model of financial markets in which the dividend of stocks and the agents' endowments are given by semimartingales defined by Itô processes. He considers the existence of a complete Radner equilibrium in the model -- i.e. the equilibrium given in terms of stock prices processes and consumption processes that satisfy market clearing conditions. The model in the equilibrium should be complete -- all stock prices should be defined by the unique martingale measure. The author considers the equivalence of such equilibrium with Arrow-Debreu equilibrium, without financial markets. The main result states that under some relatively mild assumptions the Radner equilibrium exists. In particular, in this approach, the driving processes of dividends can be time-inhomogeneous. The proof uses the equivalence of Arrow-Debreu equilibrium and Radner equilibrium. The proof of the existence of an Arrow-Debreu equilibrium depends on previous works [the author and \textit{S. Predoiu}, Stochastic Processes Appl. 124, No. 1, 81--100 (2014; Zbl 1301.60058); ``Existence and uniqueness of Arrow-Debreu equilibria with consumptions in \(\mathbf{L}^0_+\)'', Preprint, \url{arXiv:1304.3284}] and on the analytic properties of the agents' utility functions.
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dynamic stochastic equilibrium
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Radner equilibrium
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martingale representation
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non-stationary market models
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asset pricing
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