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Equilibrium pricing and market completion: a counterexample

Author

Listed:
  • Elyes Jouini

    (Université Paris-Dauphine, PSL University, CNRS, CEREMADE)

Abstract

In both arbitrage and utility pricing approaches, the fictitious completion appears as a powerful tool that permits to extend complete markets results to an incomplete markets framework. Does this technique permit to characterize the equilibrium pricing interval? This note provides a negative answer.

Suggested Citation

  • Elyes Jouini, 2020. "Equilibrium pricing and market completion: a counterexample," Economics Bulletin, AccessEcon, vol. 40(3), pages 1963-1969.
    • Handle: RePEc:ebl:ecbull:eb-20-00743
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    References listed on IDEAS

    as
    1. Elyès Jouini, 2003. "Convergence of the equilibrium prices in a family of financial models," Post-Print halshs-00167153, HAL.
    2. Jouini, Elyes & Napp, Clotilde, 2003. "A class of models satisfying a dynamical version of the CAPM," Economics Letters, Elsevier, vol. 79(3), pages 299-304, June.
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    4. Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, vol. 20(3), pages 381-408, June.
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    7. Ioannis Karatzas & John P. Lehoczky & Steven E. Shreve, 1990. "Existence and Uniqueness of Multi-Agent Equilibrium in a Stochastic, Dynamic Consumption/Investment Model," Mathematics of Operations Research, INFORMS, vol. 15(1), pages 80-128, February.
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    9. Bizid, Abdelhamid & Jouini, Elyès, 2005. "Equilibrium Pricing in Incomplete Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(4), pages 833-848, December.
    10. Stanley R. Pliska, 1986. "A Stochastic Calculus Model of Continuous Trading: Optimal Portfolios," Mathematics of Operations Research, INFORMS, vol. 11(2), pages 371-382, May.
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    14. Elyès Jouini & Marie Chazal, 2007. "Equilibrium Pricing Bounds on Option Prices," Working Papers halshs-00176642, HAL.
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    17. Perrakis, Stylianos & Ryan, Peter J, 1984. "Option Pricing Bounds in Discrete Time," Journal of Finance, American Finance Association, vol. 39(2), pages 519-525, June.
    18. Elyès Jouini & Clotilde Napp, 2002. "Arbitrage Pricing And Equilibrium Pricing: Compatibility Conditions," World Scientific Book Chapters, in: Marco Avellaneda (ed.), Quantitative Analysis In Financial Markets Collected Papers of the New York University Mathematical Finance Seminar(Volume III), chapter 6, pages 131-158, World Scientific Publishing Co. Pte. Ltd..
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    More about this item

    Keywords

    arbitrage pricing; utility pricing; equilibrium pricing; incomplete markets; fictitious completion;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium

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