Incomplete markets
Contingent Claims in Incomplete Markets: A Case Study
... of markets of this ...complete markets there are infinitely many such equi- valent martingale measures, leaving researchers looking for what could be a good candidate measure for ...
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Implications of incomplete markets for international economies
... in incomplete international economies, subject to cor- rect ...in incomplete markets, the solution to the problem distills the insight that the domestic and foreign SDFs can be partitioned into ...
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Incomplete Markets, Labor Supply and Capital Accumulation
... under incomplete markets, but total hours worked are lower due to the wealth effect, so that the total effect on output is, a priori, ...insurance markets reduces ...the markets doubles ...
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Dynamics of Entrepreneurship under Incomplete Markets
... While being exposed to significant risk, the entrepreneur nonetheless has various options to manage risk. For example, the liquidation option substantially enhances the entrepreneur’s ability to manage downside risk. We ...
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Tax and Transfer Programs in an Incomplete Markets Model
... incomplete markets model, this same increase in τ also entails a welfare loss, but now it is only equal to ...insurance markets, it is plausible that such a system can improve welfare even if it is fi ...
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Fiscal Policy and Debt Management with Incomplete Markets
... Optimal debt management in our model in section 2 differs significantly from that in other incomplete markets models (e.g., Aiyagari et al. (2002) and Farhi (2010)). In our model, the invariant joint ...
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Risk Measure Pricing and Hedging in Incomplete Markets
... incomplete markets based on a more practical choice of risk measure (which is mostly a mandatory banking practice), and attempts to associate prices with optimal hedging strategies as in utility based ...
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Incomplete markets and the output-inflation tradeoff
... Scheinkman and Weiss were the …rst to identify the non-neutrality of money shocks when borrowing constraints make cash holdings heterogenous; however, the in…nite-dimensional wealth distribution of their model did not ...
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Analysis of an ϵ-arbitrage model for incomplete markets
... But the conditions that guarantee dynamics spanning are nontrivial restrictions on market structures and price dynamics; hence there are situations in which exact replication is impossible (for example, if the volatility ...
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Solving incomplete markets models by derivative aggregation
... This paper presents a novel algorithm that uses a combination of projection methods, simulation and perturbation to solve the model. The algorithm is in principle applicable to any model of incomplete ...
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Limited enforcement, bubbles and trading in incomplete markets
... complete markets example studied in Alvarez and Jermann (2001) and Kehoe and Levine (2001), in which agents are not allowed to trade after ...an incomplete markets economy having a Pareto optimal ...
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Investment, consumption and hedging under incomplete markets
... We next turn to the effect of risk. An important prediction of our model is that the idiosyn- cratic project volatility has two opposing effects on the implied option value and hence on the investment timing decision. On ...
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Securitization and Real Investment in Incomplete Markets
... One main result in our paper is that pooling and tranching are valuable in reducing ambiguity surrounding the valuation of new real investments in incomplete markets. These ideas are applicable to any ...
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Derivative Pricing in Complete and Incomplete Markets
... The Binomial Model for Option Pricing has been presented first by [3]. The basic idea underlying this approach is the replication of a derivative’s payoff using the marketed assets. Before discussing the Binomial Tree ...
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ECOM131: TOPICS IN MACROECONOMICS B GROWTH AND INCOMPLETE MARKETS
... Most of modern macro is built upon the growth model: Two comprehensive frameworks are business cycle models (both RBC and NKM) and heterogeneous agent models (with different types of heterogeneity). Module A covers ...
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Investment, Consumption, and Hedging under Incomplete Markets
... complete markets) no longer ...of incomplete markets on investment timing in an intuitive way, we proceed with our analysis and develop insights in a pedagogical way by working out four models, which ...
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Belief heterogeneity and survival in incomplete markets
... complete markets. By contrast, this set is not a singleton in incomplete mar- ...Hence incomplete markets fail to select for traders with correct ...
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Monetary Policy with Incomplete Markets
... We consider an extension of a general equilibrium model with incomplete markets that consid- ers cash-in-advance constraints. The total amount of money is supplied by an authority, which produces at no cost ...
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Generalised Sharpe Ratios and Asset Pricing in Incomplete Markets
... Asset pricing in incomplete markets is an intriguing problem because of the price ambiguity one has to deal with. Traditionally this ambi- guity is either removed completely by assuming a representative ...
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Belief heterogeneity and survival in incomplete markets
... that incomplete markets select for a wide range of beliefs, our second result shows that surviving traders whose beliefs are incorrect affect asset ...
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