Equilibrium in risk-sharing games

DOI10.1007/S00780-017-0323-9zbMATH Open1416.91012DBLPjournals/fs/AnthropelosK17arXiv1412.4208OpenAlexW3021452402WikidataQ59614217 ScholiaQ59614217MaRDI QIDQ2364537FDOQ2364537

Authors: Michail Anthropelos, Constantinos Kardaras 

Publication date: 21 July 2017

Published in: Finance and Stochastics (Search for Journal in Brave)

Abstract: The large majority of risk-sharing transactions involve few agents, each of whom can heavily influence the structure and the prices of securities. This paper proposes a game where agents' strategic sets consist of all possible sharing securities and pricing kernels that are consistent with Arrow-Debreu sharing rules. First, it is shown that agents' best response problems have unique solutions. The risk-sharing Nash equilibrium admits a finite-dimensional characterisation and it is proved to exist for arbitrary number of agents and be unique in the two-agent game. In equilibrium, agents declare beliefs on future random outcomes different than their actual probability assessments, and the risk-sharing securities are endogenously bounded, implying (among other things) loss of efficiency. In addition, an analysis regarding extremely risk tolerant agents indicates that they profit more from the Nash risk-sharing equilibrium as compared to the Arrow-Debreu one.

Full work available at URL: https://arxiv.org/abs/1412.4208

Recommendations

• The effect of market power on risk-sharing
• Effective risk aversion in thin risk‐sharing markets
• Allocation of risks and equilibrium in markets with finitely many traders
• Strategy-proof risk sharing
• Optimal risk-sharing rules and equilibria with Choquet-expected-utility.

zbMATH Keywords

Nash equilibriumheterogeneous beliefsrisk sharingreporting of beliefs

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Noncooperative games (91A10) 2-person games (91A05) (n)-person games, (n>2) (91A06)

Cites Work

• Stochastic finance. An introduction in discrete time
• Informed Speculation with Imperfect Competition
• Title not available (Why is that?)
• Sharing Beliefs: Between Agreeing and Disagreeing
• Equilibrium in a Reinsurance Market
• Optimal capital and risk allocations for law- and cash-invariant convex functions
• Inf-convolution of risk measures and optimal risk transfer
• Arbitrage, Short Sales, and Financial Innovation
• OPTIMAL RISK SHARING FOR LAW INVARIANT MONETARY UTILITY FUNCTIONS
• Persistent private information
• Competition in financial innovation
• Optimal risk sharing with non-monotone monetary functionals
• Information Revelation and Market Incompleteness
• Strategic Trading and Welfare in a Dynamic Market
• General equilibrium with endogenously incomplete financial markets
• Title not available (Why is that?)
• Moral Hazard Contracting and Private Credit Markets
• General equilibrium with endogenous securities and moral hazard

Cited In (16)

• Risk trading and endogenous probabilities in investment equilibria
• Quantile-based risk sharing with heterogeneous beliefs
• Weighted comonotonic risk sharing under heterogeneous beliefs
• Does risk sharing increase with risk aversion and risk when commitment is limited?
• Constrained stochastic cost allocation
• Title not available (Why is that?)
• Efficiency and equilibria in games of optimal derivative design
• Competitive equilibria in a comonotone market
• Title not available (Why is that?)
• Pricing of debt and equity in a financial network with comonotonic endowments
• Endogenous inverse demand functions
• Characterizing optimal allocations in quantile-based risk sharing
• Nash equilibria in optimal reinsurance bargaining
• Optimal premium pricing in a competitive stochastic insurance market with incomplete information: a Bayesian game-theoretic approach
• The effect of market power on risk-sharing
• Price impact under heterogeneous beliefs and restricted participation

This page was built for publication: Equilibrium in risk-sharing games

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q2364537)