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A Simple Characterization of Dynamic Completeness in Continuous Time

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  • Theodoros M. Diasakos

Abstract

I establish a necessary and sufficient condition for the securities' market to be dynamically-complete in a single-commodity, pure-exchange economy with many Lucas' trees whose dividends are geometric Brownian motions. Even though my analysis is based upon the representative-agent version of this economy, the condition depends neither on the utility function of the representative agent, nor on the functional form of her endowment. As a consequence, it characterizes dynamic completeness in this economy even in the presence of many heterogenous agents.

Suggested Citation

  • Theodoros M. Diasakos, 2011. "A Simple Characterization of Dynamic Completeness in Continuous Time," Carlo Alberto Notebooks 211, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:211
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    References listed on IDEAS

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    More about this item

    Keywords

    Dynamically-Complete Markets; Continuous Time; General Equilibrium;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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