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The Comparative Statics of Equilibrium Derivative Prices

Author

Listed:
  • Masamitsu Ohnishi

    (Graduate School of Economics, Osaka University; Daiwa Securities Chair, Graduate School of Economics, Kyoto University)

  • Yusuke Osaki

    (Graduate School of Economics, Osaka University)

Abstract

We examine the conditions for preferences and risks that guarantee monotonicity of equilibrium derivative prices. In a Lucas economy with a derivative, we derive the equilibrium derivative price under expectation with respect to risk-neutral probability, and analyze comparative statics on the equilibrium derivative price based on the risk-neutral probability.

Suggested Citation

  • Masamitsu Ohnishi & Yusuke Osaki, 2004. "The Comparative Statics of Equilibrium Derivative Prices," Discussion Papers in Economics and Business 04-19, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:0419
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    References listed on IDEAS

    as
    1. Franke, Gunter & Stapleton, Richard C. & Subrahmanyam, Marti G., 1998. "Who Buys and Who Sells Options: The Role of Options in an Economy with Background Risk," Journal of Economic Theory, Elsevier, vol. 82(1), pages 89-109, September.
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    More about this item

    Keywords

    Equilibrium Derivative Price; First-order Stochastic Dominance; Noise Risk; Risk-Neutral Probability.;
    All these keywords.

    JEL classification:

    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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