This paper analyzes the aritrage free security markets and the general equilibrium existence problem for a stochastic economy with incomplete financial markets. Information structure is given by an event tree. This pa...This paper analyzes the aritrage free security markets and the general equilibrium existence problem for a stochastic economy with incomplete financial markets. Information structure is given by an event tree. This paper restricts attention to purely financial securities. It is assume that trading takes place in the sequence of spot markets and futures markets for securities payable in units of account. Unlimited short selling in securities is allowed. Financial markets may be incomplete: some consumption streams may be impossible to obtain by any trading strategy. Securities may be individually precluded from trade at arbitrary states and dates. The security price process is arbitrage free the dividend process if and only if there exists a stochstic state price (present value) process: the present value of the security prices at every vertex is the present value of their dividend and capital values over the set of immediate successors; the current value of each security at every vertex is the present value of its future dividend stream over all succeeding vertices. The existence of such an equilibrium is proved under the following condition: continuous, weakly convex, strictly monotone and complete preferences, strictly positive endowments and dividends processes.展开更多
This paper extends Farkas Minkowski’s Lemma and Stiemke’s Lemma from the Euclidean space to (l 1,l ∞). The extensions of Farkas Minkowski’s Lemma and Stiemke’s Lemma are the Basic Valuation Theore...This paper extends Farkas Minkowski’s Lemma and Stiemke’s Lemma from the Euclidean space to (l 1,l ∞). The extensions of Farkas Minkowski’s Lemma and Stiemke’s Lemma are the Basic Valuation Theorem in the case (l 1,l ∞). The security price is weakly arbitrage free if and only if there exists a positive state vector; the security price is strictly arbitrage free if and only if there exists a strictly positive state vector. The present value of the securities prices at date 0 is the value of their returns over all countably infinite possible states of nature at date 1.展开更多
文摘This paper analyzes the aritrage free security markets and the general equilibrium existence problem for a stochastic economy with incomplete financial markets. Information structure is given by an event tree. This paper restricts attention to purely financial securities. It is assume that trading takes place in the sequence of spot markets and futures markets for securities payable in units of account. Unlimited short selling in securities is allowed. Financial markets may be incomplete: some consumption streams may be impossible to obtain by any trading strategy. Securities may be individually precluded from trade at arbitrary states and dates. The security price process is arbitrage free the dividend process if and only if there exists a stochstic state price (present value) process: the present value of the security prices at every vertex is the present value of their dividend and capital values over the set of immediate successors; the current value of each security at every vertex is the present value of its future dividend stream over all succeeding vertices. The existence of such an equilibrium is proved under the following condition: continuous, weakly convex, strictly monotone and complete preferences, strictly positive endowments and dividends processes.
文摘This paper extends Farkas Minkowski’s Lemma and Stiemke’s Lemma from the Euclidean space to (l 1,l ∞). The extensions of Farkas Minkowski’s Lemma and Stiemke’s Lemma are the Basic Valuation Theorem in the case (l 1,l ∞). The security price is weakly arbitrage free if and only if there exists a positive state vector; the security price is strictly arbitrage free if and only if there exists a strictly positive state vector. The present value of the securities prices at date 0 is the value of their returns over all countably infinite possible states of nature at date 1.