Equilibrium Pricing in Incomplete Markets

Bizid, Abdelhamid; Jouini, Elyès

Bizid, Abdelhamid; Jouini, Elyès (2005), Equilibrium Pricing in Incomplete Markets, Journal of Financial and Quantitative Analysis, 40, 4, p. 833-848. http://dx.doi.org/10.1017/S002210900000199X

Type

Article accepté pour publication ou publié

External document link

http://halshs.archives-ouvertes.fr/halshs-00176484/en/

Date

2005

Journal name

Journal of Financial and Quantitative Analysis

Volume

Number

Publisher

Cambridge University Press

Pages

833-848

Abstract (EN)

Given exogenously the price process of some assets, we constrain the price process of other assets, which are characterised by their final pay-offs. We deal with an incomplete market framework in a discrete time model and assume the existence of the equilibrium. In this setup, we derive restrictions on the state-price deflators and these restrictions do not depend on a particular choice of utility function. A stochastic volatility model is numerically investigated as an example. Our approach leads to an interval of admissible prices much better than the arbitrage pricing interval.

Subjects / Keywords

incomplete markets; pricing

JEL

G12 - Asset Pricing; Trading Volume; Bond Interest Rates
D52 - Incomplete Markets