The problem of fair pricing of contingent claims is well understood in the contex of an arbitrage free, complete financial market, with perfect information : the so-called arbitrage approach permits to construct a unique valuation operator compatible with observed price rocesses. In the more...

The present paper considers a class of general equilibrium economics when the primitive uncertainty model features uncertainty about continuous-time volatility. This requires a set of mutually singular priors, which do not share the same null sets. For this setting we introduce an appropriate...

In this paper we argue that in realistically calibrated two period general equilibrium models with incomplete markets CAPM-pricing provides a good benchmark for equilibrium prices even when agents are not mean-variance optimizers and returns are not normally distributed. We numerically...

A generalization of the continuous time mutual fund theorem is given, with no assumptions made on the investors utility functions for consumption and final wealth, except that they are time-additive and non-decreasing. The extension is due to a new mathematical approach, using no more than...

This paper gives an overview of results and developments in the area of pricing and hedging contingent claims in an incomplete market by means of a quadratic criterion. We first present the approach of risk-minimization in the case where the underlying discounted price process X is a local...

We consider an extension of a general equilibrium model with incomplete markets that considers cash-in-advance constraints. The total amount of money is supplied by an authority, which produces at no cost and lends money to agents at short term nominal rates of interest, meeting the demand....

We consider an extension of a general equilibrium model with incomplete markets that considers cash-in-advance constraints. The total amount of money is supplied by an authority, which produces at no cost and lends money to agents at short term nominal rates of interest, meeting the demand....

When financial markets are incomplete, shareholders will in general disagree on the optimal level of investment to be undertaken by the firm (Grossman and Hart, 1979). Macroeconomic models with heterogeneous agents and incomplete markets (e.g. Krusell and Smith, 1998) usually ignore this issue...

In the incomplete markets model with numeraire asset and a single con- sumption good we show that, even with homothetic preferences, on compact sets of prices Continuity, Walras' identity and Homogeneity characterize the properties of market excess demand.This result is proved by an extension of...