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Continuous equilibrium under base preferences and attainable initial endowments
| Content Provider | EconStor |
|---|---|
| Author | Horst, Ulrich Kupper, Michael Macrina, Andrea Mainberger, Christoph |
| Abstract | We consider a full equilibrium model in continuous time comprising a finite number of agents and tradable securities.We show that, if the agents' endowments are spanned by the securities and if the agents have entropic utilities, an equilibrium exists and the agents' optimal trading strategies are constant. Affine processes, and the theory of information-based asset pricing are used to model the endogenous asset price dynamics and the terminal payoff. Semi-explicit pricing formulae are obtained and applied to numerically analyze the impact of the agents' risk aversion on the implied volatility of simultaneously-traded European-style options. |
| File Format | |
| Language | English |
| Publisher | SFB 649, Economic Risk |
| Publisher Date | 2011-01-01 |
| Publisher Place | Berlin |
| Access Restriction | Open |
| Rights Holder | http://www.econstor.eu/dspace/Nutzungsbedingungen |
| Subject Keyword | continuous-time equilibrium CAPM affine processes information-based asset pricing implied volatility Optionspreistheorie Kapitalmarkttheorie Wertpapierhandel Gleichgewicht Capital Asset Pricing Model Volatilität Theorie Existence and Stability Conditions of Equilibrium Incomplete Markets General Equilibrium and Disequilibrium: Financial Markets |
| Content Type | Text |
| Resource Type | Article |
